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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-K

(Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-21558

CNL INCOME FUND XII, LTD.
(Exact name of registrant as specified in its charter)

Florida 59-3078856
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (407) 540-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class: Name of exchange on which registered:
None Not Applicable

Securities registered pursuant to Section 12(g) of the Act:

Units of limited partnership interest ($10 per Unit)
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No __

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2): Yes __ No X

Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,500,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.

DOCUMENTS INCORPORATED BY REFERENCE:
None




PART I


Item 1. Business

CNL Income Fund XII, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 20, 1991. The general partners of the Partnership are Robert
A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on September 29, 1992, the
Partnership offered for sale up to $45,000,000 of limited partnership interests
(the "Units") (4,500,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
March 12, 1992. The offering terminated on March 15, 1993, at which date the
maximum offering proceeds of $45,000,000 had been received from investors who
were admitted to the Partnership as limited partners ("Limited Partners").

The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totalled
$39,615,456, and were used to acquire 48 Properties, including interests in
three Properties owned by joint ventures in which the Partnership is a
co-venturer, to loan $208,855 to the tenant of Kingsville Real Estate Joint
Venture and to establish a working capital reserve for Partnership purposes.

As of December 31, 1999, the Partnership owned 42 Properties directly
and owned six Properties indirectly through joint venture or tenancy in common
arrangements. During 2000, the Partnership sold its Property in Cleveland,
Tennessee and reinvested the majority of the net sales proceeds in a Krystal
Property in Pooler, Georgia. In addition, during 2000, the Partnership sold its
Property in Bradenton, Florida and reinvested the majority of the net sales
proceeds in a Property in Colorado Springs, Colorado as tenants-in-common with
CNL Income Fund VII, Ltd., a Florida limited partnership and an affiliate of the
General Partners. During the year ended December 31, 2001, the Partnership and
the joint venture partner liquidated Middleburg Joint Venture and the
Partnership received its pro rata share of the liquidation proceeds. The
Partnership reinvested the majority of these proceeds in a joint venture
arrangement, CNL VIII, X, XII Kokomo Joint Venture, with CNL Income Fund VIII,
Ltd. and CNL Income Fund X, Ltd., each of which is a Florida limited partnership
and an affiliate of the General Partners, to purchase and hold one Property. In
addition, during 2001, the Partnership sold its Properties in Rialto, California
and Winter Haven, Florida and reinvested the net sales proceeds in two
Properties, one each in Pasadena and Pflugerville, Texas. During the year ended
December 31, 2002, the Partnership sold its Property in Arlington, Texas to a
third party and reinvested the net sales proceeds from the sale and the
remaining portion of the net sales proceeds from the 2001 sale of the Property
in Winter Haven, Florida in a Property in San Antonio, Texas. In addition,
during 2002, the Partnership sold its Property in Valdosta, Georgia to a third
party and reinvested the net sales proceeds in a Property in Clive, Iowa. As of
December 31, 2002, the Partnership owned 41 Properties directly and held
interests in six Properties owned by joint ventures in which the Partnership is
a co-venturer and one Property owned with an affiliate of the General Partners
as tenants-in-common. The Partnership generally leases the Properties on a
triple-net basis with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities.

The Partnership holds its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.

Leases

Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
the joint ventures in which the Partnership is a co-venturer provide for initial
terms ranging from 5 to 20 years (the average being 18 years), and expire
between 2004 and 2020. Generally, the leases are on a triple-net basis, with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities. The leases of the Properties provide for minimum base annual
rental payments (payable in monthly installments) ranging from approximately
$48,000 to $228,500. Generally, the leases provide for percentage rent, based on
sales in excess of a specified amount, to be paid annually. In addition, the
majority of the leases provide that, commencing in specified lease years
(generally the sixth lease year), the annual base rent required under the terms
of the lease will increase.

Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 35 of the Partnership's 48 Properties also have been
granted options to purchase Properties at the Property's then fair market value
after a specified portion of the lease term has elapsed. Fair market value will
be determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases, the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.

The leases generally provide that, in the event the Partnership wishes
to sell the Property subject to that lease, the Partnership first must offer the
lessee the right to purchase the Property on the same terms and conditions, and
for the same price, as any offer which the Partnership has received for the sale
of the Property.

Major Tenants

During 2002, two lessees (or groups of affiliated tenants) of the
Partnership, (i) Jack in the Box Inc. and Jack in the Box Eastern Division, L.P.
(which are affiliated entities under common control of Jack in the Box Inc.)
(hereinafter referred to as "Jack in the Box Inc.") and (ii) Flagstar
Enterprises, Inc., each contributed more than 10% of the Partnership's total
rental revenues (including the Partnership's share of rental revenues from
Properties owned by joint ventures and a Property owned with an affiliate of the
General Partners as tenants-in-common). As of December 31, 2002, Jack in the Box
Inc. was the lessee under leases relating to eight restaurants and Flagstar
Enterprises, Inc. was the lessee under leases relating to 11 restaurants. It is
anticipated that based on the minimum rental payments required by the leases,
these two lessees each will continue to contribute more than 10% of the
Partnership's total rental revenues in 2003. In addition, four Restaurant
Chains, Long John Silver's, Hardee's, Jack in the Box and Denny's, each
accounted for more than 10% of the Partnership's total rental revenues during
2002 (including the Partnership's share of rental revenues from Properties owned
by joint ventures and a Property owned with an affiliate of the General Partners
as tenants-in-common). In 2003, it is anticipated that these four Restaurant
Chains each will continue to account for more than 10% of the Partnership's
total rental revenues to which the Partnership is entitled under the terms of
the leases. Any failure of these lessees or Restaurant Chains will materially
affect the Partnership's income if the Partnership is not able to re-lease these
Properties in a timely manner. No single tenant or groups of affiliated tenants
lease Properties with an aggregate carrying value in excess of 20% of the total
assets of the Partnership.

Joint Venture and Tenancy in Common Arrangements

The Partnership has entered into the following joint venture and
tenancy in common arrangements as of December 31, 2002:



Entity Name Year Ownership Partners Property

Des Moines Joint Venture 1992 18.61% CNL Income Fund VII, Ltd. Des Moines, WA
CNL Income Fund XI, Ltd.

Williston Real Estate Joint 1993 59.05% CNL Income Fund X, Ltd. Williston, FL
Venture






Kingsville Real Estate Joint 1993 31.13% CNL Income Fund IV, Ltd. Kingsville, TX
Venture
Columbus Joint Venture 1998 27.72% CNL Income Fund XVI, Ltd. Columbus, OH
CNL Income Fund XVIII, Ltd.

Bossier City Joint Venture 1999 55.00% CNL Income Fund VIII, Ltd. Bossier City, LA
CNL Income Fund XIV, Ltd.

CNL Income Fund VII, Ltd., 2000 57.00% CNL Income Fund VII, Ltd. Colorado Springs,
and CNL Income Fund XII, CO
Ltd. Tenants in Common

CNL VIII, X, XII Kokomo Joint 2001 80.00% CNL Income Fund VIII, Ltd. Kokomo, IN
Venture CNL Income Fund X, Ltd.


Each of the joint ventures or tenancies in common were formed to hold
one Property. Each CNL Income Fund is an affiliate of the General Partners and
is a limited partnership organized pursuant to the laws of the state of Florida.
The Partnership shares management control equally with the affiliates of the
General Partners

The joint venture and tenancy in common arrangements provide for the
Partnership and its joint venture or tenancy in common partners to share in all
costs and benefits in proportion to each partner's percentage interest in the
business entity. The Partnership and its partners are also jointly and severally
liable for all debts, obligations and other liabilities of the joint venture or
tenancy in common. Net cash flow from operations is distributed to each joint
venture or tenancy in common partner in accordance with its respective
percentage interest in the business entity.

CNL VIII, X, XII Kokomo Joint Venture has an initial term of 30 years.
Williston Real Estate Joint Venture, Des Moines Real Estate Joint Venture,
Kingsville Real Estate Joint Venture, Columbus Joint Venture and Bossier City
Joint Venture each have an initial term of 20 years and, after the expiration of
the initial term, continues in existence from year to year unless terminated at
the option of either joint venturer by an event of dissolution. Events of
dissolution include the bankruptcy, insolvency or termination of any joint
venturer, sale of the Property owned by the joint venture and mutual agreement
of the Partnership and its joint venture partner to dissolve the joint venture.
Any liquidation proceeds, after paying joint venture debts and liabilities and
funding reserves for contingent liabilities, will be distributed first to the
joint venture partners with positive capital account balances in proportion to
such balances until such balances equal zero, and thereafter in proportion to
each joint venture partner's percentage interest in the joint venture.

The joint venture and tenancy in common agreements restrict each
party's ability to sell, transfer to assign its joint venture or tenancy in
common interest without first offering it for sale to its partner, either upon
such terms and conditions as to which the parties may agree or, in the event the
parties cannot agree, on the same terms and conditions as any offer from a third
party to purchase such joint venture or tenancy in common interest.

The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.

Certain Management Services

RAI Restaurants, Inc. (formerly known as CNL Restaurants XVIII, Inc.),
an affiliate of the General Partners, provides certain services relating to
management of the Partnership and its Properties pursuant to a management
agreement with the Partnership. CNL APF Partners, LP assigned its rights in, and
its obligations under, the management agreement with the Partnership to RAI
Restaurants, Inc. ("Advisor") effective January 1, 2002. All of the terms and
conditions of the management agreement, including the payment of fees, remained
unchanged. Under this agreement, the Advisor is responsible for collecting
rental payments, inspecting the Properties and the tenants' books and records,
assisting the Partnership in responding to tenant inquiries and notices, and
providing information to the Partnership about the status of the leases and the
Properties. The Advisor also assists the General Partners in negotiating the
leases. For these services, the Partnership had agreed to pay the Advisor an
annual fee of one percent of the sum of gross rental revenues from Properties
wholly owned by the Partnership plus the Partnership's allocable share of gross
revenues of joint ventures in which the Partnership is a co-venturer, but not in
excess of competitive fees for comparable services.

The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.

Competition

The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.

Employees

The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL American Properties Fund, Inc.
("APF"), the parent company of the Advisor, perform certain services for the
Partnership. In addition, the General Partners have available to them the
resources and expertise of the officers and employees of CNL Financial Group,
Inc., a diversified real estate company, and its affiliates, who may also
perform certain services for the Partnership.


Item 2. Properties

As of December 31, 2002, the Partnership owned 48 Properties. Of the 48
Properties, 41 are owned by the Partnership in fee simple, six are owned through
joint venture arrangements and one is owned with an affiliate through a tenancy
in common arrangement. See Item 1. Business - Joint Venture and Tenancy in
Common Arrangements. The Partnership is not permitted to encumber its Properties
under the terms of its partnership agreement. Reference is made to the Schedule
of Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.

Description of Properties

Land. The Partnership's Property sites range from approximately 9,200
to 120,000 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.






The following table lists the Properties owned by the Partnership,
either directly or indirectly through joint venture or tenancy in common
arrangements, as of December 31, 2002 by state. More detailed information
regarding the location of the Properties is contained in the Schedule of Real
Estate and Accumulated Depreciation for the year ended December 31, 2002.

State Number of Properties

Alabama 1
Arizona 5
California 1
Colorado 1
Florida 2
Georgia 5
Indiana 1
Iowa 1
Louisiana 2
Mississippi 2
Missouri 2
New Mexico 1
North Carolina 4
Ohio 2
South Carolina 2
Tennessee 4
Texas 11
Washington 1
------
TOTAL PROPERTIES 48
======

Buildings. Each of the Properties owned by the Partnership, either
directly or indirectly through joint venture or tenancy in common arrangements,
includes a building that is one of a Restaurant Chain's approved designs. The
buildings generally are rectangular and are constructed from various
combinations of stucco, steel, wood, brick and tile. Building sizes range from
approximately 2,100 to 11,400 square feet. All buildings on Properties are
freestanding and surrounded by paved parking areas. Buildings are suitable for
conversion to various uses, although modifications may be required prior to use
for other than restaurant operations. As of December 31, 2002, the Partnership
had no plans for renovation of the Properties. Depreciation expense is computed
for buildings and improvements using the straight-line method using a
depreciable life of 40 years for federal income tax purposes.

As of December 31, 2002, the aggregate cost of the Properties owned by
the Partnership and joint ventures (including the Property owned through a
tenancy in common arrangement) for federal income tax purposes was $33,872,208
and $9,008,446, respectively.





The following table lists the Properties owned by the Partnership,
either directly or indirectly through joint venture or tenancy in common
arrangements, as of December 31, 2002 by Restaurant Chain.

Restaurant Chain Number of Properties

Arby's 1
Bennigan's 1
Burger King 1
Denny's 8
Golden Corral 2
Hardee's 11
IHOP 1
Jack in the Box 8
KFC 1
Krispy Kreme 1
Krystal 1
Long John Silver's 6
Taco Cabana 3
Other 3
-----
TOTAL PROPERTIES: 48
=====

The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.

The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.

Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance.

As of December 31, 2002, 2001, 2000 and 1999 the Properties were 100%
occupied. As of December 31, 1998, the Properties were 96% occupied. The
following is a schedule of the average rent per property for the years ended
December 31:



2002 2001 2000 1999 1998
-------------- ------------- -------------- ------------- -------------

Rental Income (1) $ 4,252,212 $ 4,210,846 $4,102,805 $4,299,590 $4,247,369
Properties 48 48 48 48 48
Average Per Property $ 88,588 $ 87,726 $ 85,475 $ 89,575 $ 88,487



(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and tenancy in
common arrangements.






The following is a schedule of lease expirations for leases in place as
of December 31, 2002 for the next ten years and thereafter.



Percentage of
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
- -------------------- ----------------- ------------------- ------------------


2003 -- $ -- --
2004 1 14,942 .33%
2005 -- -- --
2006 -- -- --
2007 1 198,625 4.41%
2008 -- -- --
2009 1 55,233 1.23%
2010 2 108,274 2.41%
2011 6 688,115 15.29%
2012 11 1,066,032 23.68%
Thereafter 26 2,369,807 52.65%
--------- ---------------- -----------------
Total 48 $ 4,501,028 100.00%
========= ================ =================


Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2002 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business -Leases.

Flagstar Enterprises, Inc. leases 11 Hardee's restaurants. The initial
term of each lease is 20 years (expiring between 2012 and 2013) and the average
minimum base annual rent is approximately $76,800 (ranging from approximately
$61,500 to $93,300).

Jack in the Box Inc. leases eight Jack in the Box restaurants. The
initial term of each lease is 18 years (expiring between 2010 and 2011) and the
average minimum base annual rent is approximately $107,500 (ranging from
approximately $83,500 to $135,800).


Item 3. Legal Proceedings

Neither the Partnership, nor its General Partners or any affiliates of
the General Partners, nor any of their respective Properties, is party to, or
subject to, any material pending legal proceedings.


Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

(a) As of March 10, 2003, there were 3,464 holders of record of the Units.
There is no public trading market for the Units, and it is not anticipated that
a public market for the Units will develop. During 2002, Limited Partners who
wished to sell their Units may have offered the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their distributions used to acquire additional Units (to the
extent Units were available for purchase), may have done so pursuant to such
Plan. The General Partners have the right to prohibit transfers of Units. From
inception through December 31, 2002, the price for any Unit transferred pursuant
to the Plan was $9.50 per Unit. The price paid for any Unit transferred other
than pursuant to the Plan was subject to negotiation by the purchaser and the
selling Limited Partner. The Partnership will not redeem or repurchase Units.

The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 2002 and 2001 other than
pursuant to the Plan, net of commissions.



2002 (1) 2001 (1)
---------------------------------- ------------------------------------
High Low Average High Low Average
--------- -------- ---------- --------- --------- ----------

First Quarter $9.50 $ 6.37 $ 8.12 $6.12 $ 5.60 $ 5.78
Second Quarter 7.09 6.73 6.90 9.50 6.20 7.25
Third Quarter 9.50 6.37 8.76 10.00 6.23 7.18
Fourth Quarter 9.50 6.37 7.74 8.00 6.50 6.94


(1) A total of 53,865 and 35,663 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2002 and 2001,
respectively.

The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.

For the years ended December 31 2002 and 2001, the Partnership declared
cash distributions of $3,937,508 and $3,825,008, respectively, to the Limited
Partners. Distributions during the year ended December 31, 2002 included
$112,500 in a special distribution representing cumulative excess operating
reserves. No amounts distributed to partners for the years ended December 31,
2002 and 2001, are required to be or have been treated by the Partnership as a
return of capital for purposes of calculating the Limited Partners' return on
their adjusted capital contributions. No distributions have been made to the
General Partners to date.

As indicated in the chart below, distributions were declared at the
close of each of the Partnership's calendar quarters. These amounts include
monthly distributions made in arrears for the Limited Partners electing to
receive such distributions on this basis.

Quarter Ended 2002 2001
------------------ --------------- ---------------

March 31 $ 956,252 $ 956,252
June 30 956,252 956,252
September 30 956,252 956,252
December 31 1,068,752 956,252

The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.

(b) Not applicable.






Item 6. Selected Financial Data



2002 2001 2000 1999 1998
------------- -------------- ------------- -------------- -------------

Year ended December 31:
Continuing Operations (4):
Revenues $3,690,280 $3,705,082 $3,909,923 $3,907,627 $4,003,059
Equity in earnings of
joint ventures 409,465 364,478 373,694 344,964 95,142
Income from continuing
operations (1) 3,209,078 3,133,332 3,653,711 3,508,478 2,790,122

Discontinued Operations (4):
Revenues 72,298 169,361 169,376 171,008 177,858
Income from discontinued
operations (2) 566,478 134,918 166,505 136,565 143,415

Net income 3,775,556 3,268,250 3,820,216 3,645,043 2,933,537

Net income (loss) per Unit:
Continuing operations $ 0.71 $ 0.70 $ 0.81 $ 0.78 $ 0.62
Discontinued operations 0.13 0.03 0.04 0.03 0.03
------------- -------------- ------------- -------------- -------------
Total $ 0.84 $ 0.73 $ 0.85 $ 0.81 $ 0.65
============= ============== ============= ============== =============

Cash distributions declared (3) $3,937,508 $3,825,008 $3,825,008 $3,825,008 $3,960,008
Cash distributions declared
per Unit (3) 0.88 0.85 0.85 0.85 0.88


At December 31:
Total assets $39,827,704 $39,836,611 $40,319,220 $40,440,927 $40,634,898
Partners' capital 38,487,374 38,649,326 39,206,084 39,210,876 39,390,841


(1) Income from continuing operations for the years ended December 31,
2001, 2000 and 1999, includes $349,516, $254,405 and $74,714 from gains
on sales of assets. Income from continuing operations for the year
ended December 31, 1998 includes $104,374 from a loss on sale of
assets. Income from continuing operations for the years ended 2002,
2001, 2000 and 1998 includes $6,584, $362,265, $155,281 and $206,535,
respectively, for provisions for write-down of assets.

(2) Income from discontinued operations for the year ended December 31,
2002 includes $501,083 from gain on sale of discontinued operations.

(3) Distributions for the years ended December 31, 2002 and 1998, include a
special distribution to the Limited Partners of $112,500 and $135,000,
respectively, which represented cumulative excess operating reserves.

(4) Certain items in the prior years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on net income. The results of operations relating to
Properties that were either disposed of or were classified as held for
sale as of December 31, 2002 are reported as discontinued operations.
The results of operations relating to Properties that were identified
for sale of December 31, 2001 but sold subsequently are reported as
continuing operations.

The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.


Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The Partnership was organized on August 20, 1991, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, to be leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are generally triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. The leases of
the Properties provide for minimum base annual rental amounts (payable in
monthly installments) ranging from approximately $48,000 to $228,500. Generally,
the leases provide for percentage rent based on sales in excess of a specified
amount. In addition, a majority of the leases provide that, commencing in
specified lease years (ranging from the third to the sixth lease year), the
annual base rent required under the terms of the lease will increase. As of
December 31, 2002, 2001 and 2000, the Partnership owned 41 Properties directly
and held interests in seven Properties either through joint venture or tenancy
in common arrangements.

Capital Resources

Cash from operating activities was $3,939,391, $3,934,568 and
$3,867,350, for the years ended December 31, 2002, 2001, and 2000, respectively.
Cash from operating activities during 2002, as compared to 2001, remained flat.
The increase in cash from operating activities during 2001 as compared to 2000
was primarily a result of changes in the Partnership's working capital.

Other sources and uses of cash included the following during the years
ended December 31, 2002, 2001 and 2000.

In March 2000, the Partnership sold its Property in Cleveland,
Tennessee to a third party and received net sales proceeds of approximately
$791,500, resulting in a gain of approximately $147,600. In April 2000, the
Partnership used these net sales proceeds along with net sales proceeds received
from the 1999 sale of its Property in Morganton, North Carolina to reinvest in a
Property in Pooler, Georgia. The transaction relating to the sale of the
Property in Cleveland, Tennessee and the reinvestment of the net sales proceeds
qualified as a like-kind exchange transaction for federal income tax purposes.

In July 2000, the Partnership sold its Property in Bradenton, Florida
to a third party and received net sales proceeds of approximately $1,227,900,
resulting in a gain of approximately $106,800. In August 2000, the Partnership
reinvested the net sales proceeds from the sale in an additional Property in
Colorado Springs, Colorado, as tenants-in-common with CNL Income Fund VII, Ltd.,
a Florida limited partnership and an affiliate of the General Partners. The
Partnership owns a 57% interest in the profits and losses of this Property. The
transaction relating to the sale of the Property in Bradenton, Florida and the
reinvestment of the net sales proceeds qualified as a like-kind exchange
transaction for federal income tax purposes.

In March 2001, Middleburg Joint Venture, in which the Partnership owned
an 87.54% interest, sold its Property to the tenant in accordance with the
option under its lease agreement to purchase the Property, for $1,900,000. Due
to the fact that the joint venture had recorded accrued rental income,
representing non-cash amounts that the joint venture had recognized as income
since the inception of the lease relating to the straight-lining of future
scheduled rent increases in accordance with generally accepted accounting
principles, a loss of approximately $61,900 was recorded by the joint venture in
March 2001. In April 2001, Middleburg Joint Venture was dissolved in accordance
with the joint venture agreement. No gain or loss on the dissolution of the
joint venture was incurred. The Partnership received approximately $1,663,300 as
a return of capital representing its 87.54% share of the liquidation proceeds of
the joint venture. In April 2001, the Partnership used these proceeds to invest
in a joint venture arrangement, CNL VIII, X, XII Kokomo Joint Venture, to
acquire a Property in Kokomo, Indiana with CNL Income Fund VIII, Ltd. and CNL
Income Fund X, Ltd., each of which is a Florida limited partnership and an
affiliate of the General Partners. The Partnership accounts for its investment
using the equity method since the joint venture agreement requires the consent
of all partners on key decisions affecting the operations of the underlying
Property. The joint venture acquired this Property from CNL BB Corp., an
affiliate of the General Partners. The affiliate had purchased and temporarily
held title to the Property in order to facilitate the acquisition of the
Property by the joint venture. The purchase price paid by the joint venture
represented the costs incurred by the affiliate to acquire and carry the
Property. As of December 31, 2002, the Partnership had contributed approximately
$1,689,600 to acquire the restaurant Property for an 80% interest in the profits
and losses of the joint venture.

In September 2001, the Partnership sold its Property in Rialto,
California to a third party and received net sales proceeds of approximately
$1,382,400 resulting in a gain of approximately $345,300. In October 2001, the
Partnership sold its Property in Winter Haven, Florida and received net sales
proceeds of approximately $1,090,300 resulting in a gain of approximately
$4,200. In December 2001, the Partnership invested the majority of the net sales
proceeds from the sales of these Properties in two Properties, one each in
Pasadena and Pflugerville, Texas. The Partnership acquired these Properties from
CNL Funding 2001-A, LP, an affiliate of the General Partners. The affiliate had
purchased and temporarily held title to the Properties in order to facilitate
the acquisition of the Properties by the Partnership. The purchase price paid by
the Partnership represented the costs incurred by the affiliate to acquire and
carry the Properties. These transactions, relating to the sales of the
Properties and the reinvestment of the proceeds qualified as like-kind exchange
transactions for federal income tax purposes.

In April 2002, the Partnership sold its Property in Arlington, Texas to
a third party and received net sales proceeds of approximately $1,248,200
resulting in a gain on disposal of discontinued operations of $334,000. In June
2002, the Partnership reinvested the majority of the remaining proceeds from the
2001 sale of the Property in Winter Haven, Florida and the net sales proceeds
from the sale of its Property in Arlington, Texas, in a Property in San Antonio,
Texas at an approximate cost of $1,287,700. The Partnership acquired this
Property from CNL Funding 2001-A, LP, a Delaware limited partnership and an
affiliate of the General Partners. CNL Funding 2001-A, LP had purchased and
temporarily held title to the Property in order to facilitate the acquisition of
the Property by the Partnership. The purchase price paid by the Partnership
represented the costs incurred by CNL Funding 2001-A, LP to acquire and carry
the Property.

In August 2002, the Partnership sold its Property in Valdosta, Georgia
to a third party and received net sales proceeds of approximately $623,700
resulting in a gain on disposal of discontinued operations of approximately
$167,100. In September 2002, the Partnership used the proceeds from the sale of
this Property to acquire a Property in Clive, Iowa from CNL Net Lease Investors,
L.P. ("NLI"), a California Limited Partnership, at an approximate cost of
$716,800. The sale of the Property and the reinvestment of the net sales
proceeds qualified as a like-kind exchange transaction for federal income tax
purposes. During 2002, and prior to the Partnership's acquisition of this
Property, CNL Financial LP Holding, LP ("CFN"), a Delaware Limited Partnership,
and CNL Net Lease Investors GP Corp. ("GP Corp"), a Delaware corporation,
purchased the limited partner's interest and general partner's interest,
respectively, of NLI. Prior to this transaction, an affiliate of the
Partnership's General Partners owned a 0.1% interest in NLI and served as a
General Partner of NLI. The original general partners of NLI waived their rights
to benefit from this transaction. The acquisition price paid by CFN for the
limited partner's interest was based on the portfolio acquisition price. The
Partnership acquired the Property in Clive, Iowa at CFN's cost and did not pay
any additional compensation to CFN for the acquisition of the Property. Each CNL
entity is an affiliate of the Partnership's General Partners.

None of the Properties owned by the Partnership, or the joint ventures
or tenancy in common arrangement in which the Partnership owns an interest, is
or may be encumbered. Subject to certain restrictions on borrowing, however, the
Partnership may borrow funds but will not encumber any of the Properties in
connection with any such borrowing. The Partnership will not borrow for the
purpose of returning capital to the Limited Partners. The Partnership will not
borrow under arrangements that would make the Limited Partners liable to
creditors of the Partnership. The General Partners further have represented that
they will use their reasonable efforts to structure any borrowing so that it
will not constitute "acquisition indebtedness" for federal income tax purposes
and also will limit the Partnership's outstanding indebtedness to three percent
of the aggregate adjusted tax basis of its Properties. Affiliates of the General
Partners from time to time incur certain operating expenses on behalf of the
Partnership for which the Partnership reimburses the affiliates without
interest.

Currently, rental income from the Partnership's Properties and any net
sales proceeds from the sale of Properties are invested in money market accounts
or other short-term highly liquid investments such as demand deposit accounts at
commercial banks, money market accounts and certificates of deposit with less
than a 90-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses, to make distributions to partners or to reinvest in
additional Properties. At December 31, 2002, the Partnership had $1,263,592
invested in such short-term investments as compared to $1,281,855 at December
31, 2001. The decrease in cash and cash equivalents at December 31, 2002 was due
to the Partnership reinvesting the remaining proceeds from the 2001 sale of the
Property in Winter Haven, Florida in a Property in San Antonio, Texas during
2002. As of December 31, 2002, the average interest rate earned on the rental
income deposited in demand deposit accounts at commercial banks was
approximately one percent annually. The funds remaining at December 31, 2002,
after payment of distributions and other liabilities, will be used to meet the
Partnership's working capital needs.

Short-Term Liquidity

The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.

The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.

The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.

Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on a triple-net basis, it is not anticipated that a permanent reserve for
maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purposes, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.

The Partnership generally distributes cash from operating activities
remaining after the payment of the operating expenses of the Partnership, to the
extent that the General Partners determine that such funds are available for
distribution. Based on current cash from operations, the Partnership declared
distributions to the Limited Partners of $3,937,508 for the year ended December
31, 2002 and $3,825,008, for each of the years ended December 31, 2001 and 2000.
Distributions during the year ended December 31, 2002 included $112,500 in a
special distribution representing cumulative excess operating reserves. This
represents a distribution of $0.88 per Unit for the year ended December 31, 2002
and $0.85 per Unit for the years ended December 31, 2001 and 2000. No
distributions were made to the General Partners during the years ended December
31, 2002, 2001 and 2000. No amounts distributed to the Limited Partners for the
years ended December 31, 2002, 2001, and 2000, are required to be or have been
treated by the Partnership as a return of capital for purposes of calculating
the Limited Partners' return on their adjusted capital contributions. The
Partnership intends to continue to make distributions of cash available for
distribution to the Limited Partners on a quarterly basis.

During 2000, the General Partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the
cumulative amount of such distributions would exceed the balance in the General
Partners' capital account as of December 31, 1999. Accordingly, the General
Partners were not allocated any net income and did not receive any distributions
during the year ended December 31, 2002, 2001 and 2000.

As of December 31, 2002 and 2001, the Partnership owed $20,984 and
$25,885, respectively, to affiliates for operating expenses and accounting and
administrative services. As of March 15, 2003, the Partnership had reimbursed
the affiliates for these amounts. Other liabilities including distributions
payable increased to $1,319,346 at December 31, 2002, from $1,161,400 at
December 31, 2001, primarily as a result of an increase in distributions payable
since the Partnership accrued $112,500 for a special distribution of excess
operating reserves and due to rents paid in advance and deposits. The General
Partners believe that the Partnership has sufficient cash on hand to meet its
working capital needs.

Long-Term Liquidity

The Partnership has no long-term debt or other long-term liquidity
requirements.

Critical Accounting Policies

The Partnership's leases are accounted for under the provisions of
Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and
have been accounted for using either the direct financing or the operating
method. FAS 13 requires management to estimate the economic life of the leased
property, the residual value of the leased property and the present value of
minimum lease payments to be received from the tenant. In addition, management
assumes that all payments to be received under its leases are collectible.
Changes in management's estimates or assumption regarding collectibility of
lease payments could result in a change in accounting for the lease at the
inception of the lease.

The Partnership accounts for its unconsolidated joint ventures using
the equity method of accounting. Under generally accepted accounting principles,
the equity method of accounting is appropriate for entities that are partially
owned by the Partnership, but for which operations of the investee are shared
with other partners. The Partnership's joint venture agreements require the
consent of all partners on all key decisions affecting the operations of the
underlying Property.

Management reviews the Partnership's Properties and investments in
unconsolidated entities periodically for impairment at least once a year or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The assessment is based on the carrying amount
of the Property or investment at the date it is tested for recoverability
compared to the sum of the estimated future cash flows expected to result from
its operation and sale through the expected holding period. If an impairment is
indicated, the asset is adjusted to its estimated fair value.

When the Partnership makes the decision to sell or commits to a plan to
sell a Property within one year, its operating results are reported as
discontinued operations.

Results of Operations

Comparison of year ended December 31, 2002 to year ended December 31, 2001

Total rental revenues were $3,650,343 during the year ended December
31, 2002 as compared to $3,599,423 for the same period of 2001. The increase in
rental revenues during 2002 was primarily due to the Partnership reinvesting the
majority of the net sales proceeds from the 2001 sales of the Properties in
Rialto, California and Winter Haven, Florida in Properties in Pflugerville and
Pasadena, Texas in December 2001. The increase in rental revenues was also
partially attributable to the Partnership reinvesting the proceeds from the sale
of the Property in Arlington, Texas in a Property in San Antonio, Texas. The
increase in rental revenues was partially offset because during 2002, the
Partnership stopped recording rental revenues relating to the Property in Tempe,
Arizona. The tenant of the Property is experiencing financial difficulties and
has ceased payment of rent to the Partnership. The lost revenues from this
Property will have an adverse effect on the results of operations if the
Partnership is unable to lease the Property in a timely manner.

In May 2002, Cypress Restaurants of Georgia, Inc., a lessee, filed for
Chapter 7 bankruptcy protection. In October 2002, the Partnership re-leased the
one Property leased by this tenant to a new tenant with lease terms
substantially the same as the Partnership's other leases.

The Partnership also earned $27,271 in contingent rental income for the
year ended December 31, 2002 as compared to $19,927 for the same period of 2001.
The increase in contingent rental income was due to an increase in gross sales
of certain restaurant Properties, the leases of which require the payment of
contingent rent.

For the year ended December 31, 2002, the Partnership earned $409,465
as compared to $364,478 during the same period of 2001 attributable to the net
income earned by unconsolidated joint ventures in which the Partnership is a
co-venturer. The increase in net income earned by joint ventures during 2002 was
primarily attributable to the fact that in April 2001, the Partnership invested
in a joint venture arrangement, CNL VIII, X, XII Kokomo Joint Venture, with CNL
Income Fund VIII, Ltd. and CNL Income Fund X, Ltd., each of which is a Florida
limited partnership and an affiliate of the General Partners. The increase in
net income earned by unconsolidated joint ventures during 2002 was partially
offset by the fact that in March 2001, Middleburg Joint Venture, in which the
Partnership owned an 87.54% interest, sold its Property to the tenant. The
Partnership dissolved the joint venture in accordance with the joint venture
agreement.

During the year ended December 31, 2002, two lessees (or groups of
affiliated tenants) of the Partnership Jack in the Box Inc. and Jack in the Box
Eastern Division, L.P. (which are affiliated entities under common control of
Jack in the Box Inc. (hereinafter referred to as "Jack in the Box Inc.") and
Flagstar Enterprises, Inc., each contributed more than 10% of the Partnership's
total rental revenues (including the Partnership's share of rental revenues from
Properties owned by joint ventures and a Property owned with an affiliate of the
General Partners as tenants-in-common). As of December 31, 2002, Jack in the Box
Inc. was the lessee under leases relating to eight restaurants and Flagstar
Enterprises, Inc. was the lessee under leases relating to 11 restaurants. It is
anticipated that based on the minimum rental payments required by the leases,
that these tenants will each continue to contribute more than 10% of the
Partnership's total rental revenues during 2003. In addition, during the year
ended December 31, 2002, four Restaurant Chains, Long John Silver's, Hardee's,
Jack in the Box, and Denny's, each accounted for more than 10% of the
Partnership's total rental revenues (including the Partnership's share of rental
revenues from Properties owned by joint ventures and a Property owned with an
affiliate of the General Partners as tenants-in-common). In 2003, it is
anticipated that these four Restaurant Chains each will continue to account for
more than 10% of the Partnership's total rental revenues to which the
Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains will materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner.

During the year ended December 31, 2002, the Partnership also earned
$12,666 as compared to $85,732 for the same period of 2001 in interest and other
income. Interest and other income were lower during 2002 due to a decrease in
the average cash balance as a result of the reinvestment of sales proceeds
received in 2001 and due to a decline in interest rates.

Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $890,667 for the year ended December
31, 2002 as compared to $1,285,744 for the same period of 2001. Operating
expenses were higher during 2001 as a result of the Partnership recording a
provision for write-down of assets of $362,265 relating to the Properties in
Winter Haven, Florida and Albany, Georgia. The provision represented the
difference between the net carrying value of the Properties and their estimated
fair value. The tenant of the Property in Winter Haven, Florida ceased rental
payments to the Partnership and vacated the Property. The tenant of the Property
in Albany, Georgia terminated its lease with the Partnership. The Partnership
sold the Property in Winter Haven, Florida in December 2001 and re-leased the
Property in Albany, Georgia in January 2001 to a new tenant with lease terms
substantially the same as the Partnership's other leases. In addition, operating
expenses were higher during 2001, because the Partnership incurred certain
expenses, such as repairs and maintenance, insurance and real estate taxes in
connection with the Property in Winter Haven, Florida before it was sold. This
Property was sold in December 2001 and the Partnership will not continue to
incur expenses related to this Property. The decrease in operating expenses
during 2002 was also attributable to a decrease in the costs incurred for
administrative expenses for servicing the Partnership and its Properties.
Depreciation expense increased due to the acquisitions of the Properties in San
Antonio, Texas and Clive, Iowa. Although these Properties replaced two
properties that were sold in 2002, the expenses related to disposed Properties
are reported as discontinued operations in the financial statements as required
by a newly adopted accounting pronouncement, as described below.

Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.

During the year ended December 31, 2002, the Partnership identified and
sold two Properties that met the criteria of this standard and were classified
as Discontinued Operations in the accompanying financial statements. The
Partnership sold its properties in Arlington, Texas and Valdosta, Georgia
resulting in an aggregate gain of approximately $501,000. The proceeds from the
sales were reinvested in two Properties.

Comparison of year ended December 31, 2001 to year ended December 31, 2000

Total rental revenues were $3,599,423 during the year ended December
31, 2001 as compared to $3,788,712 for the same period of 2000. The decrease in
rental revenues during 2001 was partially due to the sale of two Properties
during 2001 and the sale of two Properties during 2000. The decrease was also
partially attributable to the fact that the Partnership stopped recording rental
revenue relating to its Property in Columbus, Georgia. In 2001, the tenant of
this Property filed for Chapter 11 bankruptcy protection. In addition, rental
revenues were higher during 2000 because the Partnership collected and
recognized as income approximately $122,800 in past due rental amounts relating
to the Properties whose leases were rejected in connection with Long John
Silvers, Inc. filing for bankruptcy in 1998.

The Partnership also earned $19,927 in contingent rental income for the
year ended December 31, 2001 as compared to $5,156 for the same period of 2000.
The increase in contingent rental income was due to an increase in gross sales
of certain restaurant Properties, the leases of which require the payment of
contingent rent.

For the year ended December 31, 2001, the Partnership earned $364,478
as compared to $373,694 during the same period of 2000 attributable to the net
income earned by unconsolidated joint ventures in which the Partnership is a
co-venturer. The decrease in net income earned by these joint ventures, during
2001 as compared to 2000, was primarily due to the fact that in March 2001
Middleburg Joint Venture, in which the Partnership owned an 87.54% interest,
sold its Property at a loss of approximately $61,900. The Partnership dissolved
the joint venture, as described above. In April 2001, the Partnership used a
portion of the liquidating distribution from the joint venture to invest in CNL
VIII, X, XII Kokomo Joint Venture with affiliates of the General Partners, as
described above.

During the year ended December 31, 2001, the Partnership also earned
$85,732 as compared to $116,055 for the same period of 2000 in interest and
other income. Interest and other income were higher during 2000 primarily due to
interest earned on net sales proceeds from the sale of two Properties in 2000
pending reinvestment in additional properties. In addition, interest and other
income were higher in 2000 due to interest earned on the mortgage note held in
connection with the 1999 sale of the Property in Morganton, North Carolina.

Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $1,285,744 for the year ended December
31, 2001 as compared to $884,311 for the same period of 2000. Operating expenses
were higher during 2001 as a result of the Partnership recording a provision for
write-down of assets of $362,265 relating to the Properties in Winter Haven,
Florida and Albany, Georgia, as described above. In addition, the increase in
operating expenses during 2001, was partially attributable to an increase in the
costs incurred for administrative expenses for servicing the Partnership and its
Properties and to an increase in state taxes in states in which the Partnership
conducts business. During 2001, the Partnership terminated the leases relating
to its Properties in Winter Haven, Florida and Albany, Georgia, as described
above, and reclassified the assets from investment in direct financing leases to
real estate properties with operating leases, which resulted in increased
depreciation expense. In addition, the Partnership incurred certain expenses
such as legal fees, real estate taxes, insurance and maintenance relating to the
Property in Winter Haven, Florida, as described above.

During 2000, the Partnership recorded a provision for write-down of
assets in the amount of $155,281 relating to two Denny's Properties. The
provision represented the difference between the carrying value of the
Properties and their estimated fair value. In addition, during 2000, the
Partnership incurred $38,677 in transaction costs related to the General
Partners retaining financial and legal advisors to assist them in evaluating and
negotiating the proposed merger with APF. The merger negotiations were
terminated in March 2001.

During the year ended December 31, 2001, the Partnership recognized
gains of $349,516 related to the sales of the Properties in Rialto, California
and Winter Haven, Florida as compared to $254,405 during 2000 related to the
sales of the Properties in Cleveland Tennessee and Bradenton, Florida.

The restaurant industry has been relatively resilient during this
volatile time with steady performance during 2002. However, the industry remains
in a state of cautious optimism. Restaurant operators expect their business to
be better in 2003, according to a nationwide survey conducted by the National
Restaurant Association, but are concerned by the budget deficits being
experienced by many states and the potential of new taxes on the industry to
alleviate the situation.

The Partnership's leases as of December 31, 2002, are generally
triple-net leases, and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Inflation, overall, has had a minimal effect on
the results of operations of the Partnership. Continued inflation may cause
capital appreciation of the Partnership's Properties. Inflation and changing
prices, however, also may have an adverse impact on the sales of the restaurants
and on potential capital appreciation of the Properties.

In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and strengthen
existing accounting guidance that addresses when a company should include the
assets, liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with variable
interest entities (more commonly referred to as special-purpose entities or
off-balance sheet structures), FIN 46 requires that a variable interest entity
be considered by a company if that company is subject to a majority risk of loss
from the variable interest entity's activities or entitled to receive a majority
of the entity's residual returns or both. Prior to FIN 46, a company generally
included another entity in its consolidated financial statements only if it
controlled the entity through voting interests. Consolidation of variable
interests entities will provide more complete information about the resources,
obligations, risks and opportunities of the consolidated company. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003, and to older entities in the first
fiscal year or interim period beginning after June 15, 2003. Management believes
adoption of this standard may result in either consolidation or additional
disclosure requirements with respect to the Partnership's unconsolidated joint
ventures or Properties held with affiliates of the General Partners as
tenants-in-common, which are currently accounted for under the equity method.
However, such consolidation is not expected to significantly impact the
Partnership's results of operations.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

CONTENTS






Page

Report of Independent Certified Public Accountants 18

Financial Statements:

Balance Sheets 19

Statements of Income 20

Statements of Partners' Capital 21

Statements of Cash Flows 22-23

Notes to Financial Statements 24-36












Report of Independent Certified Public Accountants



To the Partners
CNL Income Fund XII, Ltd.



In our opinion, the accompanying balance sheets and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of CNL Income Fund XII, Ltd. (a Florida limited
partnership) at December 31, 2002 and 2001, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under item 15(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements, on January 1, 2002, the
Partnership adopted Statement of Financial Accounting Standard No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."




/s/ PricewaterhouseCoopers LLP

Orlando, Florida
January 31, 2003



CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

BALANCE SHEETS




December 31,
2002 2001
--------------- ----------------

ASSETS

Real estate properties with operating leases, net $22,884,036 $21,325,862
Net investment in direct financing leases 7,958,519 8,143,626
Real estate held for sale -- 1,376,319
Investment in joint ventures 4,434,559 4,577,565
Cash and cash equivalents 1,263,592 1,281,855
Certificates of deposit 541,162 545,107
Receivables, less allowance for doubtful accounts of $49,248
and $51,016, respectively 460 5,584
Due from related parties -- 25,037
Accrued rental income, less allowance for doubtful accounts
of $9,061 in 2002 and 2001 2,675,582 2,486,119
Other assets 69,794 69,537
---------------
----------------

$39,827,704 $39,836,611
=============== ================


LIABILITIES AND PARTNERS' CAPITAL

Accounts payable $ 7,127 $ 22,119
Real estate taxes payable 18,488 7,037
Distributions payable 1,068,752 956,252
Due to related parties 20,984 25,885
Rents paid in advance and deposits 224,979 175,992
--------------- ----------------
Total liabilities 1,340,330 1,187,285

Partners' capital 38,487,374 38,649,326
--------------- ----------------

$39,827,704 $39,836,611
=============== ================

See accompanying notes to financial statements.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

STATEMENTS OF INCOME




Year Ended December 31,
2002 2001 2000
----------------- ---------------- ----------------

Revenues:
Rental income from operating leases $ 2,734,625 $ 2,603,276 $ 2,626,789
Earned income from direct financing leases 915,718 996,147 1,161,923
Contingent rental income 27,271 19,927 5,156
Interest and other income 12,666 85,732 116,055
----------------- ---------------- ----------------
3,690,280 3,705,082 3,909,923
----------------- ---------------- ----------------
Expenses:
General operating and administrative 294,733 342,405 217,243
Property expenses 45,624 77,303 9,544
Management fees to related parties 42,279 40,719 42,538
State and other taxes 49,763 49,739 20,833
Depreciation and amortization 451,684 413,313 400,195
Provision for write-down of assets 6,584 362,265 155,281
Transaction costs -- -- 38,677
----------------- ---------------- ----------------
890,667 1,285,744 884,311
----------------- ---------------- ----------------

Income Before Gain on Sale of Assets and Equity in
Earnings of Joint Ventures 2,799,613 2,419,338 3,025,612

Gain on Sale of Assets -- 349,516 254,405

Equity in Earnings of Joint Ventures 409,465 364,478 373,694
----------------- ---------------- ----------------

Income from Continuing Operations 3,209,078 3,133,332 3,653,711
----------------- ---------------- ----------------

Discontinued Operations (Note 5)
Income from discontinued operations 65,395 134,918 166,505
Gain on disposal of discontinued operations 501,083 -- --
----------------- ---------------- ----------------
566,478 134,918 166,505
----------------- ---------------- ----------------

Net Income $ 3,775,556 $ 3,268,250 $ 3,820,216
================= ================ ================

Net Income Per Limited Partner Unit
Continuing Operations $ 0.71 $ 0.70 $ 0.81
Discontinued Operations 0.13 0.03 0.04
----------------- ---------------- ----------------

Total $ 0.84 $ 0.73 $ 0.85
================= ================ ================

Weighted Average Number of Limited Partner Units
Outstanding 4,500,000 4,500,000 4,500,000
================= ================ ================

See accompanying notes to financial statements.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

STATEMENTS OF PARTNERS' CAPITAL

Years Ended December 31, 2002, 2001 and 2000




General Partners Limited Partners
------------------------------- -------------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs
--------------- ------------- ------------- -------------- ------------ -------------

Balance, December 31, 1999 $ 1,000 $ 258,109 $ 45,000,000 $ (26,125,051) $ 25,451,362 $ (5,374,544)

Distributions to limited
partners ($0.85 per
limited partner unit) -- -- -- (3,825,008) -- --
Net income -- -- -- -- 3,820,216 --
-------------- ------------- --------------- --------------- -------------- -------------

Balance, December 31, 2000 1,000 258,109 45,000,000 (29,950,059) 29,271,578 (5,374,544)

Distributions to limited
partners ($0.85 per
limited partner unit) -- -- -- (3,825,008) -- --
Net income -- -- -- -- 3,268,250 --
-------------- ------------- --------------- --------------- -------------- -------------

Balance, December 31, 2001 1,000 258,109 45,000,000 (33,775,067) 32,539,828 (5,374,544)

Distributions to limited
partners ($0.88 per
limited partner unit) -- -- -- (3,937,508) -- --
Net income -- -- -- -- 3,775,556 --
-------------- ------------- --------------- --------------- -------------- -------------

Balance, December 31, 2002 $ 1,000 $ 258,109 $ 45,000,000 $ (37,712,575) $ 36,315,384 $ (5,374,544)
============== ============= =============== =============== ============== =============



See accompanying notes to financial statements.





Total
--------

$ 39,210,876



(3,825,008)
3,820,216
- -------------

39,206,084



(3,825,008)
3,268,250
- -------------

38,649,326



(3,937,508)
3,775,556
- -------------

$ 38,487,374
=============



CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

STATEMENTS OF CASH FLOWS



Years Ended December 31,
2002 2001 2000
---------------- ---------------- ---------------

Increase (Decrease) in Cash and Cash Equivalents:

Net income $ 3,775,556 $ 3,268,250 $ 3,820,216
---------------- ---------------- ---------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 452,725 442,404 397,718
Amortization of net investment in direct
financing leases 185,107 148,849 197,885
Amortization 5,348 5,352 5,348
Equity in earnings of joint ventures, net of
distributions 143,006 122,377 11,191
Gain on sale of assets (501,083) (349,516) (254,405)
Provisions for write-down of assets 6,584 362,265 155,281
Decrease (increase) in receivables 5,175 188,549 (118,217)
Increase in interest receivable 3,944 (33,830) --
Decrease (increase) in other assets (5,604) 6,947 (17,351)
Increase in accrued rental income (196,898) (304,245) (190,569)
Decrease in accounts payable and real estate
taxes payable (3,541) (19,057) (99,690)
Increase (decrease) in due to related parties (4,901) 3,077 (52,101)
Increase (decrease) in due from related parties 24,986 3,017 (22,832)
Increase in rents paid in advance and deposits 48,987 90,129 34,876
---------------- ---------------- ---------------
Total adjustments 163,835 666,318 47,134
---------------- ---------------- ---------------

Net Cash Provided by Operating Activities $ 3,939,391 $ 3,934,568 $ 3,867,350
---------------- ---------------- ---------------

Cash Flows from Investing Activities:
Proceeds from sale of real estate properties 1,871,865 2,472,661 2,019,357
Additions to real estate properties with
operating leases (2,004,511) (2,478,795) (1,009,067)
Liquidating distribution from joint venture -- 1,663,260 --
Investment in joint ventures -- (1,689,609) (1,268,896)
Collection on mortgage note receivable -- 43,760 6,916
Investment in certificates of deposit -- -- (500,000)
---------------- ---------------- ---------------
Net cash provided by (used in) investing
activities (132,646) 11,277 (751,690)
---------------- ---------------- ---------------

Cash Flows from Financing Activities:
Distributions to limited partners (3,825,008) (3,825,008) (3,825,008)
---------------- ---------------- ---------------
Net cash used in financing activities (3,825,008) (3,825,008) (3,825,008)
---------------- ---------------- ---------------

Net Increase (Decrease) in Cash and Cash Equivalents (18,263) 120,837 (709,348)

Cash and Cash Equivalents at Beginning of Year 1,281,855 1,161,018 1,870,366
---------------- ---------------- ---------------

Cash and Cash Equivalents at End of Year $ 1,263,592 $ 1,281,855 $ 1,161,018
================ ================ ===============


See accompanying notes to financial statements.



CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

STATEMENTS OF CASH FLOWS - CONTINUED




Years Ended December 31,
2002 2001 2000
---------------- ---------------- ---------------


Supplemental Schedule of Non-Cash Investing and
Financing Activities:

Distributions declared and unpaid at
December 31 $ 1,068,752 $ 956,252 $ 956,252
================ ================ ===============


See accompanying notes to financial statements.



CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2002, 2001, and 2000


1. Significant Accounting Policies:
-------------------------------

Organization and Nature of Business - CNL Income Fund XII, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators or franchisees of
national and regional fast-food and family-style restaurant chains.

The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50% shareholders of the
Corporate General Partner. The general partners have responsibility for
managing the day-to-day operations of the Partnership.

Real Estate and Lease Accounting - The Partnership records the
acquisitions of real estate properties at cost, including acquisition
and closing costs. Real estate properties are leased to unrelated third
parties on a triple-net basis, whereby the tenant is generally
responsible for all operating expenses relating to the property,
including property taxes, insurance, maintenance and repairs. During
the years ended December 2002, 2001, and 2000 tenants paid directly to
real estate taxing authorities of approximately $540,000, $516,800, and
$408,000, respectively, in real estate taxes in accordance with the
terms of their triple net leases with the Partnership.

The leases of the Partnership provide for base minimum annual rental
payments payable in monthly installments. In addition, certain leases
provide for contingent rental revenues based on the tenants' gross
sales in excess of a specified threshold. The partnership defers
recognition of the contingent rental revenues until the defined
thresholds are met. The leases are accounted for using either the
direct financing or the operating methods. Such methods are described
below:

Direct financing method - Leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset). Unearned income is deferred and amortized
to income over the lease terms so as to produce a constant
periodic rate of return on the Partnership's net investment in
the leases. For the leases classified as direct financing
leases, the building portions of the property leases are
accounted for as direct financing leases while a majority of
the land portion of these leases are operating leases.

Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.

Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date.






CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


1. Significant Accounting Policies - Continued:
-------------------------------------------

When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to their fair values.

When the collection of amounts recorded as rental or other income is
considered to be doubtful, a provision is made to increase the
allowance for doubtful accounts. If amounts are subsequently determined
to be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.

Investment in Joint Ventures - The Partnership's investments in Des
Moines Real Estate Joint Venture, Williston Real Estate Joint Venture,
Kingsville Real Estate Joint Venture, Columbus Joint Venture, Bossier
City Joint Venture, CNL VIII, X, XII Kokomo Joint Venture and a
property in Colorado Springs, Colorado held as tenants-in-common with
affiliates of the General Partners are accounted for using the equity
method since each joint venture agreement requires the consent of all
partners on all key decisions affecting the operations of the
underlying property.

Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.

Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts.

Lease Costs - Other assets include brokerage fees associated with
negotiating leases and are amortized over the term of the new lease
using the straight-line method.

Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.

Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs represent a reduction
of Partnership equity and a reduction in the basis of each partner's
investment.






CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


1. Significant Accounting Policies - Continued:
-------------------------------------------

Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.

Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 2002 presentation,
including a change in presentation of the statement of cash flows from
the direct to the indirect method. These reclassifications had no
effect on total partners' capital, net income or cash flows.

Statement of Financial Accounting Standards No. 144 ("FAS 144") -
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement requires that a
long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The statement also requires that the
results of operations of a component of an entity that either has been
disposed of or is classified as held for sale be reported as a
discontinued operation if the disposal activity was initiated
subsequent to the adoption of the Standard.

FASB Interpretation No. 46 ("FIN 46") - In January 2003, FASB issued
FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities" to expand upon and strengthen existing accounting
guidance that addresses when a company should include the assets,
liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with
variable interest entities (more commonly referred to as
special-purpose entities or off-balance sheet structures), FIN 46
requires that a variable interest entity be considered by a company if
that company is subject to a majority risk of loss from the variable
interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. Prior to FIN 46, a company generally
included another entity in its consolidated financial statements only
if it controlled the entity through voting interests. Consolidation of
variable interests entities will provide more complete information
about the resources, obligations, risks and opportunities of the
consolidated company. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31,
2003, and to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Management believes adoption of this
standard may result in either consolidation or additional disclosure
requirements with respect to the Partnership's unconsolidated joint
ventures or properties held with affiliates of the general partners as
tenants-in-common, which are currently accounted for under the equity
method. However, such consolidation is not expected to significantly
impact the Partnership's results of operations.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


2. Real Estate Properties with Operating Leases:
--------------------------------------------

Real estate properties with operating leases consisted of the following
at December 31:




2002 2001
------------------- -------------------

Land $ 12,724,449 $ 11,801,333
Buildings 13,093,267 12,011,873
------------------- -------------------
25,817,716 23,813,206
Less accumulated depreciation (2,933,680) (2,487,344)
------------------- -------------------

$ 22,884,036 $ 21,325,862
=================== ===================


During 2001, the tenant terminated the lease with the Partnership
relating to its property in Albany, Georgia. As a result, the
Partnership reclassified the building portion of this asset from net
investment in direct financing lease to real estate properties with
operating lease. In accordance with statement of Financial Accounting
Standards No. 13, "Accounting for Leases," the Partnership recorded the
reclassified asset at the lower of original cost, present fair value,
or present carrying value. No loss on reclassification of direct
financing lease was recorded. In connection therewith, the Partnership
entered into a new lease with a new tenant with lease terms
substantially the same as the Partnership's other leases.

In September 2001, the Partnership sold its property in Rialto,
California to a third party and received net sales proceeds of
approximately $1,382,400, resulting in a gain of approximately
$345,300. In October 2001, the Partnership sold its property in Winter
Haven, Florida to a third party and received net sales proceeds of
approximately $1,090,300, resulting in a gain of approximately $4,200.
In December 2001, the Partnership used the net sales proceeds from the
sales of the properties in Rialto, California and a portion of the net
sales proceeds from the sale of the property in Winter Haven, Florida
to invest in two additional properties, one each in Pasadena and
Pflugerville, Texas. The Partnership acquired these properties from CNL
Funding 2001-A, L.P., an affiliate of the general partners.

In June 2002, the Partnership reinvested the proceeds from the sale of
its property in Arlington, Texas and the remaining proceeds from the
2001 sale of the property in Winter Haven, Florida in a property in San
Antonio, Texas. In September 2002, the Partnership reinvested the
proceeds from the sale of a property in Valdosta, Georgia in a property
in Clive, Iowa (see Note 5).

The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2002:

2003 $ 2,944,344
2004 2,990,458
2005 3,016,349
2006 3,030,905
2007 3,052,700
Thereafter 18,102,474
----------------

$ 33,137,230
================





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


3. Net Investment in Direct Financing Leases:
-----------------------------------------

The following lists the components of the net investment in direct
financing leases at December 31:



2002 2001
----------------- -----------------

Minimum lease payments receivable $ 12,076,664 $ 13,177,488
Estimated residual values 2,769,298 2,769,298
Less unearned income (6,887,443 ) (7,803,160 )
----------------- -----------------

Net investment in direct financing leases $ 7,958,519 $ 8,143,626
================= =================


The following is a schedule of future minimum lease payments to be
received on the direct financing leases at December 31, 2002:

2003 $ 1,138,184
2004 1,154,081
2005 1,154,081
2006 1,154,081
2007 1,154,081
Thereafter 6,322,156
----------------

$ 12,076,664
================

During 2001, the Partnership established a provision for impairment in
carrying value in the amount of $64,518 for its property in Winter
Haven, Florida as a result of the tenant ceasing restaurant operations
and vacating the property. The provision represented the difference
between the carrying value of the net investment in the direct
financing lease at June 30, 2001 and the estimated fair value of the
property. In July 2001, the Partnership and the tenant terminated its
lease. As a result, the Partnership reclassified the building portion
of the asset from net investment in direct financing leases to real
estate properties with operating leases. In accordance with Statement
of Financial Accounting Standards No. 13, "Accounting for Leases," the
Partnership recorded the reclassified asset at the lower of original
cost, present fair value, or present carrying amount. No loss on
termination of direct financing lease was recorded. In October 2001,
the Partnership sold this property.

4. Investment in Joint Ventures:
----------------------------

As of December 31, 2002, the Partnership had a 59.05%, an 18.61%, a
31.13%, a 27.72%, a 55% and an 80% interest in the profits and losses
of Williston Real Estate Joint Venture, Des Moines Real Estate Joint
Venture, Kingsville Real Estate Joint Venture, Columbus Joint Venture,
Bossier City Joint Venture, and CNL VIII, X, XII Kokomo Joint Venture,
respectively. The remaining interests in these joint ventures are held
by affiliates of the Partnership which have the same general partners.
The Partnership also has a 57% interest in a property in Colorado
Springs, Colorado, with an affiliate of the general partners, as
tenants in common.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


4. Investment in Joint Ventures - Continued:
----------------------------------------

In March 2001, Middleburg Joint Venture, in which the Partnership owned
an 87.54% interest, sold its property to the tenant, in accordance with
the purchase option under the lease agreement, for $1,900,000 at a loss
of approximately $61,900. The Partnership dissolved the joint venture
in accordance with the Partnership agreement and did not incur a gain
or loss on the dissolution. In April 2001, the Partnership used the
liquidating distribution received from the dissolution of Middleburg
Joint Venture to invest in a joint venture arrangement, CNL VIII, X,
XII Kokomo Joint Venture, with CNL Income Fund VIII, Ltd. and CNL
Income Fund X, Ltd. to purchase and hold one restaurant property. The
joint venture acquired this property from CNL BB Corp., an affiliate of
the general partners. Each of the CNL Income Funds is an affiliate of
the general partners. As of December 31, 2002, the Partnership owned an
80% interest in the profits and losses of the joint venture.

Williston Real Estate Joint Venture, Des Moines Real Estate Joint
Venture, Kingsville Real Estate Joint Venture, Columbus Joint Venture,
Bossier City Joint Venture, CNL VIII, X, XII Kokomo Joint Venture and
the Partnership and affiliates, in a tenancy in common arrangement,
each own and lease one property to an operator of national fast-food or
family-style restaurants.

The following presents the joint ventures' combined, condensed
financial information at December 31:



2002 2001
------------------ ------------------

Real estate properties with operating leases, $ 7,337,741 $ 7,580,162
net
Net investment in direct financing leases 633,362 640,381
Cash 37,707 53,152
Receivables 153 951
Accrued rental income 247,903 193,083
Other assets 170 1,444
Liabilities 40,053 27,721
Partners' capital 8,216,983 8,441,452


Years Ended December 31,
2002 2001 2000
-------------- --------------- --------------

Revenues $ 943,283 $ 894,206 $ 779,865
Expenses (179,375 ) (173,420 ) (121,562 )
-------------- --------------- --------------

Net Income $ 763,908 $ 720,786 $ 658,303
============== =============== ==============







CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


4. Investment in Joint Ventures - Continued:
----------------------------------------

The Partnership recognized income totaling $409,465, $364,478, and
$373,694, for the years ended December 31, 2002, 2001, and 2000,
respectively, from these joint ventures and the property held as
tenants-in-common with affiliates.

5. Discontinued Operations:
-----------------------

In April 2002, the Partnership sold its property in Arlington, Texas to
a third party and received net sales proceeds of approximately
$1,248,200 resulting in a gain on disposal of discontinued operations
of $334,000. In August 2002, the Partnership sold its property in
Valdosta, Georgia to a third party and received net sales proceeds of
approximately $623,700 resulting in a gain on disposal of discontinued
operations of approximately $167,000. The financial results of these
properties are reflected as Discontinued Operations in the accompanying
financial statements.

The operating results of the discontinued operations for the above
properties are as follows:



Year Ended December 31,
2002 2001 2000
-------------- ------------- --------------

Rental revenues $ 72,298 $ 169,361 $ 169,376

Expenses (6,903 ) (34,443 ) (2,871 )
Gain on sale of assets 501,083 -- --
-------------- ------------- --------------
Income from discontinued
operations $ 566,478 $ 134,918 $ 166,505
============== ============= ==============


6. Allocations and Distributions:
-----------------------------

From inception through December 31, 1999, all net income and net losses
of the Partnership, excluding gains and losses from the sale of
properties, were allocated 99% to the limited partners and one percent
to the general partners. Distributions of net cash flow were made 99%
to the limited partners and one percent to the general partners.
However, the one percent of net cash flow to be distributed to the
general partners is subordinated to receipt by the limited partners of
an aggregate, ten percent, cumulative, noncompounded annual return on
their invested capital contributions (the "Limited Partners' 10%
Return").

From inception through December 31, 1999, net sales proceeds from the
sale of properties, not in liquidation of the Partnership, to the
extent distributed, were distributed first to the limited partners in
an amount sufficient to provide them with their Limited Partners' 10%
Return, plus the return of their adjusted capital contributions. The
general partners then received, to the extent previously subordinated
and unpaid, a one percent interest in all prior distributions of net
cash flow and a return of their capital contributions. Any remaining
sales proceeds distributed 95% to the limited partners and five percent
to the general partners. Any gain from the sale of a property not in
liquidation of the Partnership was, in general, allocated in the same
manner as net sales proceeds are distributable. Any loss from the sale
of a property was, in general, allocated first, on a pro rata basis, to
partners with positive balances in their capital accounts; and
thereafter, 95% to the limited partners and five percent to the general
partners.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


6. Allocations and Distributions - Continued:
-----------------------------------------

Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive capital
accounts balances, in proportion to such balances, up to amounts
sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95% to the
limited partners and five percent to the general partners.

Effective January 1, 2000, the general partners waived their right to
receive future distributions from the Partnership, including both
distributions of operating cash flow and distributions of liquidation
proceeds, to the extent that the cumulative amount of such
distributions would exceed the balance in the general partners' capital
account as of December 31, 1999. Accordingly, for years commencing
January 1, 2000 and after, the Partnership's net income will be
allocated entirely among the limited partners. However, if losses are
allocated to the general partners in a year, an amount of income equal
to the sum of such losses may be allocated to the general partners in
succeeding years. Accordingly, the general partners were not allocated
any net income and did not receive any distributions during the year
ended December 31, 2002, 2001 and 2000.

During the year ended December 31, 2002, the Partnership declared
distributions to the limited partners of $3,937,508. During the years
ended December 31, 2002 and 2001, the Partnership declared
distributions to the limited partners of $3,825,008. The distributions
during the year ended December 31, 2002 included a special distribution
of $112,500 representing cumulative excess operating reserves. No
distributions have been made to the general partners to date.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


7. Income Taxes:
------------

The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:



2002 2001 2000
--------------- --------------- ---------------

Net income for financial reporting purposes $ 3,775,556 $ 3,268,250 $ 3,820,216

Effect of timing differences relating to
depreciation (77,151) (86,914) (146,845)

Direct financing leases recorded as operating
leases for tax reporting purposes 185,106 148,848 197,885

Provision for write-down of assets -- 362,265 155,281

Effect of timing differences relating to
gains/losses on real estate property sales (501,083) (338,327) (254,405)

Deduction of transaction costs for tax reporting
purposes -- -- (243,135)

Effect of timing differences relating to equity in
earnings of joint ventures (6,759) 191,130 (55,273)

Effect of timing differences relating to allowance
for doubtful accounts -- 20,678 15,847

Accrued rental income (190,314) (303,491) (190,569)

Rents paid in advance 40,988 91,629 34,376

Other (1,768) -- --
--------------- --------------- ---------------

Net income for federal income tax purposes $ 3,224,575 $ 3,354,068 $ 3,333,378
=============== =============== ===============






CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


8. Related Party Transactions:
--------------------------

One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, Inc., a wholly owned subsidiary of CNL Holdings,
Inc. CNL APF Partners, LP, a wholly owned subsidiary of CNL American
Properties Fund, Inc. ("APF") served as the Partnership's advisor until
January 1, 2002, when it assigned its rights and obligations under a
management agreement to RAI Restaurants, Inc. (formerly known as CNL
Restaurants XVIII, Inc.). RAI Restaurants, Inc. ("the Advisor") is a
wholly owned subsidiary of APF. The individual general partners are
stockholders and directors of APF.

The Advisor provides services pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership agreed to pay
the Advisor a management fee of one percent of the sum of gross
revenues from properties owned by the Partnership and the Partnership's
allocable share of gross revenues from joint ventures. The Partnership
incurred management fees of $42,279, $40,719 and $42,538, for the years
ended December 31, 2002, 2001, and 2000, respectively.

The Advisor is also entitled to receive a deferred, subordinated real
estate disposition fee, payable upon the sale of one or more properties
based on the lesser of one-half of a competitive real estate commission
or three percent of the sales price if the Advisor provides a
substantial amount of services in connection with the sale. However, if
the net sales proceeds are reinvested in a replacement property, no
such real estate disposition fees will be incurred until such
replacement property is sold and the net sales proceeds are
distributed. The payment of the real estate disposition fee is
subordinated to receipt by the Limited Partners of their aggregate 10%
Preferred Return, plus their adjusted capital contributions. No
deferred, subordinated real estate disposition fees have been incurred
since inception.

During the years ended December 31, 2002, 2001, and 2000, the
Partnership's advisor and its affiliates provided accounting and
administrative services to the Partnership. The Partnership incurred
$207,309, $245,519, and $107,794 for the years ended December 31, 2002,
2001, and 2000, respectively, for such services.

In April 2001, the Partnership, CNL Income Fund VIII, Ltd., and CNL
Income Fund X, Ltd. invested in a joint venture arrangement, CNL VIII,
X, XII Kokomo Joint Venture to acquire a Golden Corral property from
CNL BB Corp., an affiliate of the general partners, for a total
purchase price of $2,112,011. CNL Income Fund VIII, Ltd. and CNL Income
Fund X, Ltd. are affiliates of the general partners. CNL BB Corp. had
purchased and temporarily held title to this property in order to
facilitate the acquisition of the property by the joint venture. The
purchase price paid by the joint venture represents the costs incurred
by CNL BB Corp. to acquire and carry the property.

In December 2001, the Partnership acquired two properties, one each in
Pasadena and Pflugerville, Texas from CNL Funding 2001-A, LP, for a
purchase price of approximately $2,478,795. In June 2002, the
Partnership acquired a property in San Antonio, Texas from CNL Funding
2001-A, LP at an approximate cost of $1,287,700. CNL Funding 2001-A, LP
is an affiliate of the general partners. CNL Funding 2001-A, LP had
purchased and temporarily held title to the property in order to
facilitate the acquisition of the property by the Partnership. The
purchase price paid by the Partnership represented the costs incurred
by CNL Funding 2001-A, LP to acquire and carry the property.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


8. Related Party Transactions -Continued:
-------------------------------------

In September 2002, the Partnership acquired a property in Clive, Iowa
from CNL Net Lease Investors, L.P. ("NLI"), at an approximate cost of
$716,800. During 2002, and prior to the Partnership's acquisition of
this property, CNL Financial LP Holding, LP ("CFN") and CNL Net Lease
Investors GP Corp. ("GP Corp") purchased the limited partner's interest
and general partner's interest, respectively, of NLI. Prior to this
transaction, an affiliate of the Partnership's general partners owned a
0.1% interest in NLI and served as a general partner of NLI. The
original general partners of NLI waived their rights to benefit from
this transaction. The acquisition price paid by CFN for the limited
partner's interest was based on the portfolio acquisition price. The
Partnership acquired the property in Clive, Iowa at CFN's cost and did
not pay any additional compensation to CFN for the acquisition of the
property. Each CNL entity is an affiliate of the Partnership's general
partners.

The amounts due to related parties at December 31, 2002 and 2001,
totaled $20,984 and $25,885, respectively.

9. Concentration of Credit Risk:
----------------------------

The following schedule presents rental revenues from individual
lessees, or affiliated groups of lessees, each representing more than
10% of the Partnership's total rental revenues (including the
Partnership's share of rental revenues from joint ventures and the
property held with an affiliate as tenants-in-common) for each of the
years ended December 31:



2002 2001 2000
---------------- ------------- -------------

Jack in the Box Inc. and Jack in the Box
Eastern Division, L.P. in 2001 and 2002
(formerly Foodmaker, Inc.) $ 829,799 $ 994,523 $1,024,667
Flagstar Enterprises, Inc. 744,883 761,163 766,823


In addition, the following schedule presents total rental revenues from
individual restaurant chains, each representing more than 10% of the
Partnership's total rental revenues (including the Partnership's share
of rental revenues from joint ventures and the property owned with an
affiliate as tenants-in-common), for each of the years ended December
31:



2002 2001 2000
---------------- ---------------- ---------------

Denny's $ 785,859 $ 684,816 $ 570,046
Jack in the Box 829,799 994,523 1,024,667
Hardee's 744,883 761,162 766,823
Long John Silver's 447,498 463,546 429,275


Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains will significantly impact the results of operations
of the Partnership if the Partnership is not able to re-lease the
properties in a timely manner.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


10. Selected Quarterly Financial Data:
---------------------------------

The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2002 and
2001.



2002 Quarter First Second Third Fourth Year
------------------------------- ------------- ------------- ------------- ------------- --------------

Continuing Operations (1):
Revenues $ 917,311 $ 929,943 $ 958,344 $ 884,682 $ 3,690,280
Equity in earnings of joint
ventures 101,936 104,279 101,659 101,591 409,465
Income from continuing
operations 754,551 822,986 853,384 778,157 3,209,078

Discontinued operations (1):
Revenues 41,670 21,851 8,777 -- 72,298
Income (loss) from
discontinued operations 37,041 353,828 175,859 (250 ) 566,478

Net Income 791,592 1,176,814 1,029,243 777,907 3,775,556

Net Income per Limited
Partner Unit:

Continuing operations $ 0.17 $ 0.18 $ 0.19 $ 0.17 $ 0.71
Discontinued operations 0.01 0.08 0.04 -- 0.13
------------- ------------- ------------- ------------- --------------
Total $ 0.18 $ 0.26 $ 0.23 $ 0.17 $ 0.84
============= ============= ============= ============= ==============







CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2002, 2001, and 2000


10. Selected Quarterly Financial Data - Continued:
---------------------------------------------



2001 Quarter First Second Third Fourth Year
------------------------------- ------------- ------------- ------------- ------------- --------------


Continuing Operations (1):
Revenues $ 1,002,763 $ 892,078 $ 894,760 $ 915,481 $ 3,705,082
Equity in earnings of joint
ventures 63,061 96,087 101,078 104,252 364,478
Income from continuing
operations 417,575 698,198 1,148,014 869,545 3,133,332

Discontinued operations (1):
Revenues 42,344 42,344 42,344 42,329 169,361
Income from discontinued
operations 33,734 33,734 33,734 33,716 134,918

Net Income 451,309 731,932 1,181,748 903,261 3,268,250

Net Income per Limited
Partner Unit:

Continuing operations $ 0.09 $ 0.15 $ 0.25 $ 0.21 $ 0.70
Discontinued operations 0.01 0.01 0.01 -- 0.03
------------- ------------- ------------- ------------- --------------
Total $ 0.10 $ 0.16 $ 0.26 $ 0.21 $ 0.73
============= ============= ============= ============= ==============


(1) Certain items in the quarterly financial data have been reclassified to
conform to 2002 presentation. These reclassification had no effect on
net income. The results of operations relating to properties that were
either disposed of or that were classified as held for sale as of
December 31, 2002 are reported as discontinued operations for all
periods presented. The results of operations relating to properties
that were identified for sale as of December 31, 2001, but sold
subsequently are reported as continuing operations.







Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.


PART III


Item 10. Directors and Executive Officers of the Registrant

The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL American Properties Fund, Inc. ("APF"), CNL Fund
Advisors, Inc., CNL Financial Group, Inc. and their affiliates, all of which are
affiliates of the General Partners.

James M. Seneff, Jr., age 56. Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
co-venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of APF, a public, unlisted real
estate investment trust, since 1994. Mr. Seneff served as Chief Executive
Officer of APF from 1994 through August 1999, and has served as co-Chief
Executive Officer of APF since December 2000. Mr. Seneff served as Chairman of
the Board and Chief Executive Officer of CNL Fund Advisors, Inc., formerly the
Partnership's advisor, until it merged with a wholly-owned subsidiary of APF in
September 1999, and in June 2000, was re-elected to those positions of CNL Fund
Advisors, Inc. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the
parent company of CNL Financial Group, Inc. (formerly CNL Group, Inc.), a
diversified real estate company, and has served as a Director, Chairman of the
Board and Chief Executive Officer of CNL Financial Group, Inc. since its
formation in 1980. CNL Financial Group, Inc. is the parent company, either
directly or indirectly through subsidiaries, of CNL Real Estate Services, Inc.,
CNL Capital Markets, Inc., CNL Investment Company and CNL Securities Corp., all
of which are engaged in the business of real estate finance. Mr. Seneff also
serves as a Director, Chairman of the Board and Chief Executive Officer of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust,
as well as, CNL Hospitality Corp., its advisor. In addition, he serves as a
Director, Chairman of the Board and Chief Executive Officer of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust and its
advisor, CNL Retirement Corp. Since 1992, Mr. Seneff has also served as a
Director, Chairman of the Board and Chief Executive Officer of Commercial Net
Lease Realty, Inc., a public real estate investment trust that is listed on the
New York Stock Exchange. Mr. Seneff has also served as a Director, Chairman of
the Board and Chief Executive Officer of CNL Securities Corp. since 1979; CNL
Investment Company since 1990; and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans, since 1990. Mr. Seneff formerly
served as a Director of First Union National Bank of Florida, N.A., and
currently serves as the Chairman of the Board of CNL Bank, an independent,
state-chartered commercial bank. Mr. Seneff previously served on the Florida
State Commission on Ethics and is a former member and past Chairman of the State
of Florida Investment Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement funds. The
Florida Board of Administration, Florida's principal investment advisory and
money management agency, oversees the investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.

Robert A. Bourne, age 55. Mr. Bourne has participated as a general
partner or co-venturer in over 100 real estate ventures involved in the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Bourne is a
Director of APF. Mr. Bourne served as President of APF from 1994 through
February 1999. He also served as Treasurer from February 1999 through August
1999 and from May 1994 through December 1994. He also served in various
executive positions with CNL Fund Advisors, Inc. prior to its merger with a
wholly-owned subsidiary of APF including, President from 1994 through September
1997, and Director from 1994 through August 1999. Mr. Bourne serves as President
and Treasurer of CNL Financial Group, Inc.; Director, Vice Chairman of the
Board, and Treasurer , and from 1997 until June 2002 served as President, of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust;
as well as, Director, Vice Chairman of the Board, and Treasurer, and from 1997
until June 2002 served as President, of CNL Hospitality Corp., its advisor. In
addition, Mr. Bourne serves as Director, Vice Chairman of the Board, and
Treasurer, and from 1997 until June 2002 served as President, of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust; as well as, a
Director, Vice Chairman of the Board, and Treasurer, and from 1997 until June
2002 served as President, of its advisor, CNL Retirement Corp. Mr. Bourne also
serves as a Director of CNL Bank. He has served as a Director since 1992, Vice
Chairman of the Board since February 1996, Secretary and Treasurer from February
1996 through 1997, and President from July 1992 through February 1996, of
Commercial Net Lease Realty, Inc., a public real estate investment trust listed
on the New York Stock Exchange. Mr. Bourne also serves as Director, President
and Treasurer for various affiliates of CNL Financial Group, Inc. including, CNL
Investment Company, CNL Securities Corp. and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans. Mr. Bourne began his career as
a certified public accountant employed by Coopers & Lybrand, Certified Public
Accountants, from 1971 through 1978, where he attained the position of Tax
Manager in 1975. Mr. Bourne graduated from Florida State University in 1970
where he received a B.A. in Accounting, with honors.

Curtis B. McWilliams, age 47. Mr. McWilliams has served as Co-Chief
Executive Officer of APF since December 2000 and previously served as Chief
Executive Officer from September 1999 through December 2000. Prior to the
acquisition of CNL Fund Advisors, Inc., Mr. McWilliams served as President of
APF from February 1999 until September 1999. From February 1998 to February
1999, he served as Executive Vice President of APF. Mr. McWilliams joined CNL
Financial Group, Inc. in April 1997 and served as an Executive Vice President
from October 1997 until September 1999. In addition, Mr. McWilliams served as
President of CNL Fund Advisors, Inc. and CNL Financial Services, Inc., a
corporation engaged in the business of real estate financing, from April 1997
until the acquisition of such entities by wholly-owned subsidiaries of APF in
September 1999. From September 1983 through March 1997, Mr. McWilliams was
employed by Merrill Lynch & Co. The majority of his career at Merrill Lynch &
Co. was in the Investment Banking division where he served as a Managing
Director. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Master of Business Administration degree with
a concentration in finance from the University of Chicago in 1983.

Steven D. Shackelford, age 39. Mr. Shackelford was promoted to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief Financial Officer since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors, Inc. from September 1996 to September 1999. From March
1995 to July 1996, Mr. Shackelford was a senior manager in the national office
of Price Waterhouse LLP where he was responsible for advising foreign clients
seeking to raise capital and a public listing in the United States. From August
1992 to March 1995, he was a manager in the Paris, France office of Price
Waterhouse, serving several multi-national clients. Mr. Shackelford was an audit
staff and senior from 1986 to 1992 in the Orlando, Florida office of Price
Waterhouse. Mr. Shackelford received a Bachelor of Arts degree in Accounting,
with honors, and a Master of Business Administration degree from Florida State
University and is a certified public accountant.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the General Partners, the
officers of the corporate General Partner, and persons who own more than ten
percent of a registered class of the Partnership's equity securities
(collectively, the "Reporting Persons"), to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the SEC. Reporting Persons are
required by SEC regulation to furnish the Partnership with copies of all Forms
3, 4 and 5 that they file.

Based solely on the General Partners' review of the copies of such
forms the Partnership has received and written representations from certain
Reporting Persons that they were not required to file Forms 5 for the last
fiscal year, the General Partners believe that all Reporting Persons complied
with all filing requirements applicable to them with respect to transactions
during fiscal 2002.






Item 11. Executive Compensation

Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.


Item 12. Security Ownership of Certain Beneficial Owners and Management

As of March 10, 2003, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.

The following table sets forth, as of March 10, 2003, the beneficial
ownership interests of the General Partners in the Registrant.



Title of Class Name of Partner Percent of Class

General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
--------
100%
========


Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.

The Partnership has no equity compensation plans.







Item 13. Certain Relationships and Related Transactions

The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 2002, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.



Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2002
- ---------------------------------- -------------------------------------- --------------------------------

Reimbursement to affiliates for Operating expenses are reimbursed at Accounting and administrative
operating expenses the lower of cost or 90% of the services: $207,309
prevailing rate at which comparable
services could have been obtained in
the same geographic area.
Affiliates of the General Partners
from time to time incur certain
operating expenses on behalf of the
Partnership for which the
Partnership reimburses the
affiliates without interest.

Annual management fee One percent of the sum of gross $42,279
to affiliates operating revenues from Properties
wholly owned by the Partnership plus the
Partnership's allocable share of gross
revenues of joint ventures in which the
Partnership is a co-venturer. The
management fee, which will not exceed
competitive fees for comparable services
in the same geographic area, may or may
not be taken, in whole or in part as to
any year, in the sole discretion of
affiliates.











Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2002
- --------------------------------- -------------------------------------- ------------------------------

Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee payable disposition fee, payable upon sale
to affiliates of one or more Properties, in an
amount equal to the lesser of (i)
one-half of a competitive real estate
commission, or (ii) three percent of the
sales price of such Property or
Properties. Payment of such fee shall be
made only if affiliates of the General
Partners provide a substantial amount of
services in connection with the sale of a
Property or Properties and shall be
subordinated to certain minimum returns
to the Limited Partners. However, if the
net sales proceeds are reinvested in a
replacement Property, no such real estate
disposition fee will be incurred until
such replacement Property is sold and the
net sales proceeds are distributed.

General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to one percent of Partnership
Partnership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.

General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to five percent of Partnership
Partnership net sales proceeds distributions of such net sales
from a sale or sales not in proceeds, subordinated to certain
liquidation of the Partnership minimum returns to the Limited
Partners.









Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 2002
- --------------------------------- -------------------------------------- ------------------------------

General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales proceeds from a sale or sales of
from a sale or sales in substantially all of the
liquidation of the Partnership Partnership's assets will be
distributed in the following order or
priority: (i) first, to pay all debts and
liabilities of the Partnership and to
establish reserves; (ii) second, to
Partners with positive capital account
balances, determined after the allocation
of net income, net loss, gain and loss,
in proportion to such balances, up to
amounts sufficient to reduce such
balances to zero; and (iii) thereafter,
95% to the Limited Partners and 5% to the
General Partners.



In June 2002, the Partnership acquired a property in San Antonio, Texas from CNL
Funding 2001-A, LP, an affiliate of the general partners at an approximate cost
of $1,287,700. CNL Funding 2001-A, LP had purchased an temporarily held title to
the property in order to facilitate the acquisition of the property by the
Partnership. The purchase price paid by the Partnership represented the costs
incurred by CNL Funding 2001-A, LP to acquire and carry the property.

In September 2002, the Partnership acquired a property in Clive, Iowa from CNL
Net Lease Investors, L.P. ("NLI") at an approximate cost of $716,800. During
2002, and prior to the Partnership's acquisition of this property, CNL Financial
LP Holding, LP ("CFN") and CNL Net Lease Investors GP Corp. ("GP Corp")
purchased the limited partner's interest and general partner's interest,
respectively, of NLI. Prior to this transaction, an affiliate of the
Partnership's general partners owned a 0.1% interest in NLI and served as a
general partner of NLI. The original general partners of NLI waived their rights
to benefit from this transaction. The acquisition price paid by CFN for the
limited partner's interest was based on the portfolio acquisition price. The
Partnership acquired the property in Clive, Iowa at CFN's cost and did not pay
any additional compensation to CFN for the acquisition of the property. Each CNL
entity is an affiliate of the Partnership's general partners.








Item 14. Controls and Procedures

The General Partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate General Partner have evaluated the
Partnership's disclosure controls and procedures within 90 days prior to the
filing of this Annual Report on Form 10-K and have determined that such
disclosure controls and procedures are effective.

Subsequent to the above evaluation, there were no significant changes
in internal controls or other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.


PART IV


Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this report.

1. Financial Statements



Report of Independent Certified Public Accountants

Balance Sheets at December 31, 2002 and 2001

Statements of Income for the years ended December 31, 2002, 2001, and 2000

Statements of Partners' Capital for the years ended December 31, 2002, 2001, and 2000

Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000

Notes to Financial Statements

2. Financial Statement Schedules

Schedule II -Valuation and Qualifying Accounts for the years
ended December 31, 2002, 2001 and 2000

Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002

Notes to Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002

All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.


3. Exhibits

**3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11
and incorporated herein by reference.)

**4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11
and incorporated herein by reference.)

**4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XII, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, and incorporated herein
by reference.)

**10.1 `Management Agreement between CNL Income Fund XII,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on April 15, 1993, and
incorporated herein by reference.)

**10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995,
and incorporated herein by reference.)

**10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)

**10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2001, and
incorporated herein by reference.)

**10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.5 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
2002, and incorporated herein by reference.)

99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)

99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)

(b) The Registrant filed no reports on Form 8-K during the period October
1, 2002 through December 31, 2002.

**previously filed







SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 26th day of
March, 2003.

CNL INCOME FUND XII, LTD.

By: CNL REALTY CORPORATION
General Partner

/s/ Robert A. Bourne
-----------------------
ROBERT A. BOURNE, President


By: ROBERT A. BOURNE
General Partner

/s/ Robert A. Bourne
-------------------------
ROBERT A. BOURNE


By: JAMES M. SENEFF, JR.
General Partner

/s/ James M. Seneff, Jr.
-------------------------
JAMES M. SENEFF, JR.








Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.



Signature Title Date


/s/ Robert A. Bourne President, Treasurer and Director March 26, 2003
- ------------------------------------ (Principal Financial and Accounting
Robert A. Bourne Officer)


/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 26, 2003
- ------------------------------------ (Principal Executive Officer)
James M. Seneff, Jr.







CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CORPORATE GENERAL PARTNER

PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund XII, Ltd. (the
"registrant"), certify that:

1. I have reviewed this annual report on Form 10-K of the registrant;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:

a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and

c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: March 26, 2003


/s/ James M. Seneff, Jr.
- ---------------------------
James M. Seneff, Jr.
Chief Executive Officer





CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER

PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate general partner of CNL Income Fund XII, Ltd. (the "registrant")
certify that:

1. I have reviewed this annual report on Form 10-K of the registrant;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:

a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and

c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: March 26, 2003


/s/ Robert A. Bourne
- ---------------------------
Robert A. Bourne
President and Treasurer


CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2002, 2001, and 2000




Additions Deductions
--------------------------------- -------------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------

2000 Allowance for
doubtful
accounts (a) $ 20,814 $ -- $ 264,253 (b) $ -- (c) $ 93,125 $ 191,942
============== =============== ================ ============= ============ ============

2001 Allowance for
doubtful
accounts (a) $ 191,942 $ 12,665 $ 100,231 (b) $ 91,631 (c) $ 153,130 $ 60,077
============== =============== ================ ============= ============ ============

2002 Allowance for
doubtful
accounts (a) $ 60,077 $ 42,182 $ -- $ 35,319 (c) $ 8,631 $ 58,309
============== =============== ================ ============= ============ ============


(a) Deducted from receivables and accrued rental income on the balance sheet.

(b) Reduction of rental, earned, and other income.

(c) Amounts written off as uncollectible.


CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2002




Costs Capitalized
Subsequent to
Initial Cost Acquisition
--------------------- -------------------
Encum- Buildings aImprove- Carrying
brances Land Improvementments Costs
--------- --------- -------------------- ------

Properties the Partnership
has Invested in Under
Operating Leases:

Burger King Restaurants:
Natchitoches, Louisian- $152,329 - $489,366 -

Denny's Restaurants:
St. Ann, Missouri (m) - 338,826 302,975 - -
Phoenix, Arizona - 456,306 - - -
Black Mountain, North -arolina 260,493 - - -
Blue Springs, Missouri- 497,604 - - -
Columbus, Georgia (g) - 125,818 314,690 - -
Tempe, Arizona - 709,275 - - -

Golden Corral Family
Steakhouse Restaurant:
Arlington, Texas - 711,558 1,159,978 - -

Hardee's Restaurants:
Crossville, Tennessee - 290,136 334,350 - -
Toccoa, Georgia - 208,847 - - -
Columbia, Mississippi - 134,810 - - -
Pensacola, Florida - 277,236 - - -
Columbia, South Caroli-a 325,674 - - -
Simpsonville, South Ca-olina 239,494 - - -
Indian Trail, North Ca-olina 298,938 - - -
Clarksville, Georgia - 160,478 415,540 - -

Jack in the Box Restaurants:
Spring, Texas - 564,164 510,639 - -
Houston, Texas - 360,617 659,805 - -
Grapevine, Texas - 471,367 590,988 - -
Phoenix, Arizona - 294,773 527,466 - -
Petaluma, California - 534,076 800,780 - -
Willis, Texas - 569,077 427,381 - -
Houston, Texas - 368,758 663,022 - -


KFC Restaurant:
Las Cruces, New Mexico- 175,905 - - -

Krispy Kreme Doughnuts Restaurants:
Doughnuts Restaurant:
Clive, Iowa (o- 306,431 410,366 - -

Krystal Restaurant:
Pooler, Georgia - 410,085 598,982 - -


Long John Silver's Restaurants:
Clarksville, Tennessee-(k) 166,283 384,574 - -
El Paso, Texas - 314,270 - - -
Tucson, Arizona - 277,378 245,385 - -
Asheville, North Carol-na (l) 213,536 453,223 - -

Taco Cabana Restaurants:
Pfugerville, Texas - 674,782 816,449 - -
Pasadena, Texas - 477,192 510,374 - -
Houston, Texas (p) - 616,685 671,028 - -

Other:
Albany, Georgia (n) - 378,547 765,736 - -
Statesville, No(i) Car-lina 240,870 334,643 30,000 -
Tempe, Arizona (h) - 121,831 620,527 55,000 -
--------- ---------- --------- ------


$12,724,449$12,518,901$574,366 -
========= ========== ========= ======

Property of Joint Venture in Which
the Partnership has an 18.61%
Interest and has Invested in
Under an Operating Lease:

Jack in the Box Restaurant:
Des Moines, Washington- $322,726 $791,658 - -
========= ========== ========= ======

Property of Joint Venture in Which
the Partnership has a 31.13%
Interest and has Invested in
Under an Operating Lease:

Denny's Restaurant:
Kingsville, Texas (j) - $171,061 $243,326 $99,128 -
========= ========== ========= ======

Property of Joint Venture in
Which the Partnership has a
27.72% Interest in Under an
Operating Lease:

Arby's Restaurant:
Columbus, Ohio - $407,096 - $498,684 -
========= ========== ========= ======

Property of Joint Venture in
Which the Partnership has a
55% Interest in Under an
Operating Lease:

IHOP Restaurant:
Bossier City, Louisian- $453,016 866,192 - -
========= ========== ========= ======

Property in Which the Partnership
has a 57% Interest and has
Invested in as Tenants-in-Common
Under an Operating Lease:

Bennigan's Restaurant:
Colorado Springs, Colo-ado $947,120 1,279,013 - -
========= ========== ========= ======

Property of Joint Venture in Which
the Partnership has a 80.00%
Interest and has Invested in
Under an Operating Lease:

Golden Corral Family
Steakhouse Restaurant:
Kokomo, Indiana -q) $644,163 $1,467,848 $ - $ -
========= ========== ===================

Properties the Partnership has
Invested in Under Direct
Financing Leases:

Denny's Restaurants:
Phoenix, Arizona - - - 467,545 -
Black Mountain, North -arolina - 696,851 - -
Blue Springs, Missouri- - - 485,945 -
Tempe, Arizona - - - 491,258 -
Amherst, Ohio - 127,672 169,928 316,796 -

Hardee's Restaurants:
Toccoa, Georgia - - 437,938 - -
Fultondale, Alabama - 173,015 - 636,480 -
Poplarville, Mississip-i 138,019 - 444,485 -
Columbia, Mississippi - - 367,836 - -
Pensacola, Florida - - - 450,193 -
Columbia, South Caroli-a - 452,333 - -
Simpsonville, South Ca-olina - 517,680 - -
Indian Trail, North Ca-olina - 496,110 - -

KFC Restaurant:
Las Cruces, New Mexico- - 224,790 - -

Long John Silver's Restaurants:
Murfreesboro, Tennesse- 174,746 555,186 - -
El Paso, Texas - - - 371,286 -
Chattanooga, Tennessee- 142,627 584,320 - -
--------- ---------- --------- ------

$756,079 $4,502,972 $3,663,988 -
========= ========== ========= ======

Property of Joint Venture in Which
the Partnership has a 59.05%
Interest and has Invested in
Under a Direct Financing Lease:

Hardee's Restaurant:
Williston, Florida - $150,143 - $499,071 -
========= ========== ========= ======







Life on Which
Net Cost Basis at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- ------------------------------------
Buildings and Accumulatedof Con-Date Statement is
Land Improvements Total DepreciatiostructiAcquired Computed
- ----------- --------------------- --------------------------------------





$152,329 $489,366 $641,695 $159,547 1993 12/92 (b)


338,826 302,975 641,801 39,519 1993 11/92 (m)
456,306 (f) 456,306 (f) 1993 11/92 (d)
260,493 (f) 260,493 (f) 1992 12/92 (d)
497,604 (f) 497,604 (f) 1993 12/92 (d)
125,818 314,690 440,508 97,528 1980 01/93 (g)
709,275 (f) 709,275 (f) 1982 02/93 (d)



711,558 1,159,978 1,871,536 389,626 1992 12/92 (b)


290,136 334,350 624,486 111,725 1992 12/92 (b)
208,847 (f) 208,847 (f) 1992 12/92 (d)
134,810 (f) 134,810 (f) 1991 01/93 (d)
277,236 (f) 277,236 (f) 1993 03/93 (d)
325,674 (f) 325,674 (f) 1991 05/93 (d)
239,494 (f) 239,494 (f) 1992 06/93 (d)
298,938 (f) 298,938 (f) 1992 07/93 (d)
160,478 415,540 576,018 130,544 1992 07/93 (b)


564,164 510,639 1,074,803 169,560 1993 01/93 (b)
360,617 659,805 1,020,422 219,091 1993 01/93 (b)
471,367 590,988 1,062,355 196,240 1992 01/93 (b)
294,773 527,466 822,239 175,677 1992 01/93 (b)
534,076 800,780 1,334,856 265,903 1993 01/93 (b)
569,077 427,381 996,458 141,250 1993 02/93 (b)
368,758 663,022 1,031,780 219,130 1993 02/93 (b)



175,905 (f) 175,905 (f) 1990 03/93 (d)



306,431 410,366 716,797 5,066 1995 09/02 (b)


410,085 598,982 1,009,067 54,075 2000 04/00 (b)



166,283 384,574 550,857 53,459 1993 03/93 (k)
314,270 (f) 314,270 (f) 1993 06/93 (d)
277,378 245,385 522,763 77,582 1992 07/93 (b)
213,536 453,223 666,759 61,579 1993 08/93 (l)


674,782 816,449 1,491,231 29,483 2000 12/01 (b)
477,192 510,374 987,566 18,430 2000 12/01 (b)
616,685 671,028 1,287,713 13,048 1997 06/02 (b)


378,547 765,736 1,144,283 69,612 1991 12/92 (n)
240,870 364,643 605,513 71,710 1993 04/93 (i)
121,831 675,527 797,358 164,296 1988 04/93 (h)
- ----------- ---------- ---------- ---------


$12,724,449 $13,093,267$25,817,716 $2,933,680
=========== ========== ========== =========







$322,726 $791,658 $1,114,384 $269,451 1992 12/92 (b)
=========== ========== ========== =========







$150,742 $243,326 $394,068 $51,226 1988 10/92 (j)
=========== ========== ========== =========







$407,096 $498,684 $905,780 $67,184 1998 08/98 (b)
=========== ========== ========== =========







$453,016 $866,192 $1,319,208 $91,158 1998 11/99 (b)
=========== ========== ========== =========







$947,120 $1,279,013 $2,226,133 $103,031 2000 08/00 (b)
=========== ========== ========== =========








$644,163 $1,397,579 $2,041,742 $81,524 12/00 4/01 (b)
=========== ========== ========== =========






- (f) (f) (d) 1993 11/92 (d)
- (f) (f) (d) 1992 12/92 (d)
- (f) (f) (d) 1993 12/92 (d)
- (f) (f) (d) 1982 02/93 (d)
(f) (f) (f) (e) 1987 07/93 (e)


- (f) (f) (d) 1992 12/92 (d)
(f) (f) (f) (e) 1993 12/92 (e)
(f) (f) (f) (e) 1993 01/93 (e)
- (f) (f) (d) 1991 01/93 (d)
- (f) (f) (d) 1993 03/93 (d)
- (f) (f) (d) 1991 05/93 (d)
- (f) (f) (d) 1992 06/93 (d)
- (f) (f) (d) 1992 07/93 (d)


- (f) (f) (d) 1990 03/93 (d)


(f) (f) (f) (e) 1989 02/93 (e)
- (f) (f) (d) 1993 06/93 (d)
(f) (f) (f) (e) 1993 07/93 (e)









(f) (f) (f) (e) 1993 12/92 (e)







CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2002


(a) Transactions in real estate and accumulated depreciation are summarized
below. The balances in 1999, 2000, and 2001 have been adjusted to
reflect the reclassification of properties accounted for as
discontinued operations.



Accumulated
Cost Depreciation
---------------- -----------------

Properties the Partnership has Invested in Under
Operating Leases:

Balance, December 31, 1999 $ 21,307,180 $ 1,894,354
Acquisition 1,009,067 --
Reclassified to operating lease (l) 302,975 --
Dispositions (455,986 ) --
Depreciation expense -- 363,275
---------------- -----------------

Balance, December 31, 2000 22,163,236 2,257,629
Reclassified to operating lease (m) 1,383,763 --
Acquisitions 2,478,795 --
Dispositions (2,212,588 ) (178,245 )
Depreciation expense -- 407,960
---------------- -----------------

Balance, December 31, 2001 23,813,206 2,487,344
Acquisitions 2,004,510 --
Depreciation expense -- 446,336
---------------- -----------------

Balance, December 31, 2002 $ 25,817,716 $ 2,933,680
================ =================

Property of Joint Venture in Which the Partnership has a 18.61%
Interest and has Invested in Under an Operating Lease:

Balance, December 31, 1999 $ 1,114,384 $ 190,284
Depreciation expense -- 26,389
---------------- -----------------

Balance, December 31, 2000 1,114,384 216,673
Depreciation expense -- 26,389
---------------- -----------------

Balance, December 31, 2001 1,114,384 243,062
Depreciation expense -- 26,389
---------------- -----------------

Balance, December 31, 2002 $ 1,114,384 $ 269,451
================ =================







CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED

December 31, 2002




Accumulated
Cost Depreciation
---------------- -----------------

Property of Joint Venture in Which the Partnership has 27.72%
Interest and has Invested in Under Operating Leases:

Balance, December 31, 1999 $ 905,780 $ 17,315
Depreciation expense -- 16,623
---------------- -----------------

Balance, December 31, 2000 905,780 33,938
Depreciation expense -- 16,623
---------------- -----------------

Balance, December 31, 2001 905,780 50,561
Depreciation expense -- 16,623
---------------- -----------------

Balance, December 31, 2002 $ 905,780 $ 67,184
================ =================

Property of Joint Venture in Which the Partnership has a 31.13%
Interest and has Invested in Under an Operating Lease:

Balance, December 31, 1999 $ 394,068 $ 12,807
Depreciation expense (j) -- 12,807
---------------- -----------------

Balance, December 31, 2000 394,068 25,614
Depreciation expense (j) -- 12,806
---------------- -----------------

Balance, December 31, 2001 394,068 38,420
Depreciation expense -- 12,806
---------------- -----------------

Balance, December 31, 2002 $ 394,068 $ 51,226
================ =================






CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED

December 31, 2002




Accumulated
Cost Depreciation
---------------- -----------------

Property of Joint Venture in Which the Partnership has a 55%
Interest and has Invested in Under an Operating Lease:

Balance, December 31, 1999 $ 1,319,208 $ 4,541
Depreciation expense -- 28,873
---------------- -----------------

Balance, December 31, 2000 1,319,208 33,414
Depreciation expense -- 28,872
---------------- -----------------

Balance, December 31, 2001 1,319,208 62,286
Depreciation expense -- 28,872
---------------- -----------------

Balance, December 31, 2002 $ 1,319,208 $ 91,158
================ =================

Property in Which the Partnership has a 57% Interest and has
Invested in Under an Operating Lease:

Balance, December 31, 1999 $ -- $ --
Acquisition 2,226,133 --
Depreciation expense -- 17,765
---------------- -----------------

Balance, December 31, 2000 2,226,133 17,765
Depreciation expense -- 42,633
---------------- -----------------

Balance, December 31, 2001 2,226,133 60,398
Depreciation expense -- 42,633
---------------- -----------------

Balance, December 31, 2002 $ 2,226,133 $ 103,031
================ =================

Property of Joint Venture in Which the Partnership has an 80.00%
Interest and has Invested in Under an Operating Lease:

Balance, December 31, 2000 $ -- $ --
Acquisition 2,112,011 --
Depreciation expense -- 36,695
---------------- -----------------

Balance, December 31, 2001 2,112,011 36,695
Reimbursement of construction costs (q) (70,269 ) (1,759)
Depreciation expense -- 46,588
---------------- -----------------

Balance, December 31, 2002 $ 2,041,742 $ 81,524
================ =================



CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED

December 31, 2002


(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.

(c) As of December 31, 2002, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$33,872,208 and $9,008,446, respectively. All of the leases are treated
as operating leases for federal income tax purposes.

(d) The portion of the lease relating to the building has been recorded as
a direct financing lease. The cost of the building has been included in
net investment in direct financing leases; therefore, depreciation is
not applicable.

(e) The lease for the land and building has been recorded as a direct
financing lease. The cost of the land and building has been included in
net investment in direct financing leases; therefore, depreciation is
not applicable.

(f) Certain components of the lease relating to land and building have been
recorded as a direct financing lease. Accordingly, costs relating to
these components of this lease are not shown.

(g) Effective January 1994, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
to an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 29
years.

(h) Effective July 1996, the lease for this Property terminated, resulting
in the lease being reclassified as an operating lease. The land and
building were recorded at net book value and the building is being
depreciated over its remaining estimated life of approximately 27
years.

(i) Effective June 1998, the lease for this Property was amended, resulting
in a reclassification of the building portion of the lease to an
operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 25
years.

(j) The undepreciated cost of the Property in Kingsville, Florida, was
written-down to its estimated fair value due to an anticipated
impairment in value. The Partnership recognized the impairment by
recording a provision for write-down of assets in the amount of
$316,113 during 1998. The impairment at December 31, 1998, represented
the difference between the Property's carrying value and its estimated
fair value. During 1999, the joint venture re-leased the Property to a
new tenant, resulting in the reclassification of the building portion
of the lease as an operating lease. The building was recorded at net
book value and depreciated over the remaining life of approximately 19
years. The cost of the Property presented on this schedule is the net
amount at which the Property was carried at December 31, 2002,
including the provision for write-down of assets.

(k) Effective October 1999, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 23
years.

(l) Effective October 1999, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over its remaining life of approximately 24 years.





CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)

NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED

December 31, 2002

(m) Effective January 2000, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 23
years.

(n) Effective January 2001, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over its remaining life of approximately 22 years.

(o) During 2002, the Partnership purchased land and building from CNL Net
Lease Investors, L.P., an affiliate of the General Partners, for an
aggregate cost of $716,797.

(p) During 2002, the Partnership purchased land and building from CNL
2001-A, LP, an affiliate of the General Partners, for an aggregate cost
of $1,287,713.

(q) During the year ended December 31, 2001, the Partnership and affiliates
of the General Partners, as tenant-in-common, purchased land and
building from CNL BB Corp., an affiliate of the General Partners, for
an aggregate cost of $2,112,011. During the year ended December 31,
2002, the Partnership received reimbursements from the developer upon
final construction costs reconciliation. In connection therewith, the
land and building values were adjusted accordingly.









EXHIBIT INDEX



Exhibit Number

(a) Exhibits

3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11 and
incorporated herein by reference.)

4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11 and
incorporated herein by reference.)

4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XII, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on April
15, 1993, and incorporated herein by reference.)

10.1 Management Agreement between CNL Income Fund XII, Ltd. and
CNL Investment Company (Included as Exhibit 10.1 to Form
10-K filed with the Securities and Exchange Commission on
April 15, 1993, and incorporated herein by reference.)

10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995, and incorporated
herein by reference.)

10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated
herein by reference.)

10.4 Assignment of Management Agreement from CNL Advisors, Inc.
to CNL APF Partners, LP. (Included as Exhibit 10.4 to Form
10-Q filed with the Securities and Exchange Commission on
August 13, 2001, and incorporated herein by reference.)

10.5 Assignment of Management Agreement from CNL APF Partners, LP
to CNL Restaurants XVIII, Inc. (Included as Exhibit 10.5 to
Form 10-Q filed with the Securities and Exchange Commission
on August 13, 2002, and incorporated herein by reference.)

99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)

99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)







EXHIBIT 99.1




EXHIBIT 99.2